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Sunday, November 12, 2017

Where Snapchat went wrong!

Evan Spiegel, the 27-year old co-founder and CEO of Snapchat's parent company, is often billed as a visionary. But now Spiegel seems to be admitting to some significant flaws in his vision. After SNAP released its earnings report on Tuesday, Spiegel got on a conference call with analysts and acknowledged a series of mistakes and shortcomings.

In no particular order: The messaging app is too difficult to use. The company hasn't done enough to attract users on Android, the dominant platform in many international markets. And its transition to an automated advertising system has been bumpier than expected for sales.

The issues were clear in Snap's sombre third quarter results. Its losses more than 3x, sales diminished of Wall Street's estimates and the audience has remained static. Snapchat added just 4.5 million new daily active users in the quarter’s period.

There are more than 10 million visits to the Tour’s data-driven Race Center website, with 6 million fans across its digital ecosystem. We only need to look at the 2016 Rio Summer Olympics to see how digital technology is transforming the way we watch and consume sports.

Spiegel is now planning to renovate the Snapchat app. Or to put that another way: Snap is planning a massive revamp of its core product and primary moneymaker just eight months after it raised billions in a public offering.

"There is a strong likelihood that the redesign of our application will be disruptive to our business in the short term, and we don't yet know how the behavior of our community will change when they begin to use our updated application," Spiegel said on the call.

Snapchat plans major redo as user growth stalls

The stock dipped as much as a fifth in after hours trading Tuesday. Snap pared its losses somewhat Wednesday on news of Chinese tech giant Tencent amassing a 10% stake in the company, but shares were still down 15% in early trading. So how could Snap and Spiegel have gotten it so wrong? The answer may be a mix of hubris and shortsightedness.

Consider Spiegel's response to yet another setback: Spectacles. The smart sunglasses marked Snap's first foray into hardware and enjoyed some buzz early on. But on Tuesday, Snap said it was taking a nearly $40 million write down for excess inventory of the product after misjudging demand.
"We were very excited about Spectacles by the initial reception, because we were so excited we made I guess the wrong decision," Spiegel said on the call. "Ultimately, we weren't able to sell as many Spectacles as we thought we had been able to based on our early adoption."

Note: The views expressed here are those of authors and not necessarily represent those of DOT Club as a whole.

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