At least some of the discounts have an end date, it appears. The same report, citing \u201cmultiple agency executives,\u201d notes that Snap\u2019s proffered \u201cbonuses, discount coupons and media credits for ad buys\u201d are tied to the close of the second quarter. If the incentives work as likely intended, Snap could book new top line inside the current quarter that might help it meet or best market expectations.<\/p>\n
Alex Wilhelm<\/span> Contributor<\/span><\/p>\n<\/p><\/div>\n Alex Wilhelm is the editor-in-chief of Crunchbase News<\/a> and co-host of Equity<\/a>, TechCrunch’s venture capital-focused podcast.<\/p>\n Of course, incentives are not new, and potentially using discounts to drive growth is not something inherently bad. Snap declined to comment on the purported deals.<\/p>\n After its first-quarter miss, Snap\u2019s share fell steeply, erasing much of the company\u2019s post-IPO gains. Snap, which went public at $17 per share,\u00a0traded as high as $29.44<\/a>. It\u2019s worth $21.30 today. Therefore, it is not surprising that Snap wants to avoid another embarrassing earnings miss. And to see the company allegedly turn to discounts with expiration windows is not an utter shock.<\/p>\n There is a bit more to the story, however, that we should understand by viewing Snap\u2019s first quarter\u2019s results inside of proper historical context.<\/p>\n Grounding Snap\u2019s discounting push are its\u00a0first-quarter results: The company grew rapidly, lost billions and missed expectations on both ends of its line. Snap reported<\/a> first quarter revenue of $149.65 million. The street had\u00a0anticipated<\/a>\u00a0a $157.98 million tally.<\/p>\n The company was expected to be deeply unprofitable in the quarter, due in part to one-time share-based compensation expenses. Even so, Snap bested the market\u2019s expectation of a $1.92 per share loss with a steeper $2.31 per-share deficit.<\/p>\n And finally, Snap\u2019s growth in daily active users, or DAUs, fell 2\u00a0million under the expected tally<\/a> of 168 million.<\/p>\n That is broad context for why Snap may be pushing hard to ensure that it doesn\u2019t miss again in the second quarter. A similar setback to its share price will put it either at or below its IPO price, a dramatic repudiation of the young company.<\/p>\n As such, Snap must not\u00a0miss when it reports its second-quarter results. But there is something lurking beneath the firm\u2019s first-quarter miss that is interesting for us to consider: seasonality. Or perhaps more clearly: too much seasonality, and too soon.<\/p>\n In\u00a0its S-1<\/a>, Snap noted that it seasonality impact its business. That fact surprised no one. Ad-based businesses often see more sales during the fourth quarter when holiday buying cycles push consumer spend up. Brands, naturally, want a chunk of those dollars, and they spend to get them.<\/p>\n Snap\u2019s fourth quarter was gangbusters, with the firm reporting $165.68 million in revenue, up from $32.72 million during the fourth quarter of the preceding year. If the sheer magnitude of growth between Snap\u2019s results compared to the year-ago period surprises you, bear in mind that Snap is a very young business, with fewer than four quarters of positive gross margins under its belt, including the first of this year.<\/p>\n The company\u2019s year-over-year results were impressive. But also notable was the firm\u2019s history of continuing to grow sequentially \u2014 that is, from one quarter to the next \u2014 despite the impact of seasonality.\u00a0More simply, through the 2015 holiday cycle, Snap\u2019s revenue grew\u00a0sequentially<\/em>\u00a0in the first quarter of 2016 compared to the seasonally-amplified fourth quarter of 2015.<\/p>\n The company generated $32.72 million in revenue during the fourth quarter of 2015 and $38.79 million in revenue during the first quarter of 2016. That gain was smaller than other sequentially-derived revenue gains listed in its S-1, but it showed that, at the time, Snap was growing so quickly that even the impact of seasonality couldn\u2019t knock it off its upward\u00a0sequential<\/em>\u00a0path.<\/p>\n Its forward momentum was greater than the potential for a slow first quarter, compared to the expectedly hot preceding fourth quarter. The company failed to repeat the feat in the first quarter of 2017.<\/p>\n If you recall, Snap\u2019s first quarter brought in $149.65 million in revenue. And, as we listed a moment ago, Snap\u2019s fourth quarter of the preceding year saw $165.68 million in top line. The second figure, from the earlier quarter, is larger than what the company reported in the first quarter. That\u2019s a\u00a0sequential<\/em>\u00a0decline in revenue.<\/p>\n Why do we care? Because as we try to understand the company\u2019s first-quarter miss and its rush to cement the second quarter, we need to have the company\u2019s history in mind. And, of course, historical analogs.<\/p>\n After all Snap, for all its hype, is another social company that sells ads. That\u2019s not precisely new, though Snap is certainly, from a feature perspective, different than Twitter, for example. And, until recently, it was differentiated from products inside the Facebook orbit.<\/p>\n This brings us to a question: Is it normal for a company of Snap\u2019s age to see seasonality impact its revenue in terms of driving its sequential revenue\u00a0down<\/em>? Let\u2019s ask Ben Thompson.<\/p>\n Thompson, following Snap\u2019s results,\u00a0noted on Stratchery<\/a>\u00a0that the historical record is not overly kind to the company in this area. Thompson looked at the past results of Google, Facebook, Twitter, and Snap in the following way: After one of the companies started to grow at \u201c>100% [\u2026]\u00a0year-over-year,\u201d how long did it take for the firm to see a seasonally bolstered fourth quarter followed by a sequentially smaller first quarter?<\/p>\n Google won with nine years. Facebook and Twitter both rocked four. Snap, using Thompson\u2019s results, made it just one year.<\/p>\n The obvious inference from the difference is that Snap\u2019s business is operating in a different fashion than the other listed companies, two of which are in its social space.<\/p>\n Its quicker-to-declines results are hard to read positively, except the following perspective:\u00a0Snap grew so quickly that vetting it against the results of historically similar companies is silly.<\/em>\u00a0That sort of argument works for private companies that\u00a0want to present adjusted EBITDA as profit and other such silly things. We can discount it.<\/p>\n Spry readers will have caught our inconsistency by now, so let\u2019s address it.<\/p>\n That Snap\u2019s revenue fell from the fourth quarter to the first is simple. But, if we compare investor expectations for the first quarter to what happened in the fourth, the market actually anticipated the decline. Bringing the numbers back to you here, investors expected Snap to report $157.98 million, which is still a lighter result than the firm\u2019s fourth-quarter sum.<\/p>\n So, investors were, in fact, ready to allow Snap to snap its record of sequential revenue growth regardless. Again, interpretation is yours, but I have a hard time finding the inordinately bullish in that fact.<\/p>\n All this brings us back to Snap\u2019s second quarter sprint, which takes on extra weight in light of the preceding. Snap not only fell behind historical antecedents\u2019 results but fell under the already low bar that investors set for it, regarding sequential revenue growth consistency.<\/p>\n That\u2019s doubly not good.<\/p>\n Featured Image: Bryce Durbin<\/small> <\/p>\n","protected":false},"excerpt":{"rendered":"Snap\u2019s first quarter<\/h2>\n
Second quarter dreamin\u2019<\/h2>\n
New year, new results<\/h2>\n
Investors\u2019 expectations<\/h2>\n
![\"\"](\"https:\/\/tctechcrunch2011.files.wordpress.com\/2017\/05\/snap-money-up.png?w=680\")
After a painful first-quarter miss, Snap, the parent company of the popular social app Snapchat, is looking to avoid the same fate in the second. According to Digiday, Snap is working to drive new and increased business ahead of the end of its second quarter. To do so, the company is said to be cutting deals. In the words of the report, Snap is “looking to goose its ad business with… Read More<\/a><\/p>\n<\/img><\/a>
<\/img><\/a>
<\/img><\/a>
<\/img><\/a>
<\/img><\/a>
<\/img><\/a>\n<\/div>\n
<\/p>\n","protected":false},"author":5817,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[25],"tags":[59,66,26],"class_list":["post-342069","post","type-post","status-publish","format-standard","hentry","category-technology","tag-media","tag-techcrunch","tag-technology"],"_links":{"self":[{"href":"https:\/\/people.utm.my\/asmawisham\/wp-json\/wp\/v2\/posts\/342069","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/people.utm.my\/asmawisham\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/people.utm.my\/asmawisham\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/people.utm.my\/asmawisham\/wp-json\/wp\/v2\/users\/5817"}],"replies":[{"embeddable":true,"href":"https:\/\/people.utm.my\/asmawisham\/wp-json\/wp\/v2\/comments?post=342069"}],"version-history":[{"count":0,"href":"https:\/\/people.utm.my\/asmawisham\/wp-json\/wp\/v2\/posts\/342069\/revisions"}],"wp:attachment":[{"href":"https:\/\/people.utm.my\/asmawisham\/wp-json\/wp\/v2\/media?parent=342069"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/people.utm.my\/asmawisham\/wp-json\/wp\/v2\/categories?post=342069"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/people.utm.my\/asmawisham\/wp-json\/wp\/v2\/tags?post=342069"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}