Snapchat Is Burning Cash Like A Drunken Sailor
Snapchat raised $3.4 billion with its IPO, yet the company kept only $2.3 billion of it. Since, the company has been burning cash like a drunken sailor:
Since its initial public offering Snapchat has garnered quarterly revenue in the hundreds of millions of dollars, yet the company has consistently hemorrhaged cash. Its Q2 2018 revenue of $262 million was up 44% Y/Y. Daily active users (“DAUs”) of 188 million rose 9%, while average revenue per user (“ARPU”) rose 33%. Growth in ARPU outstripped the 16% rise in cost of revenue per user (“CoRPU”). This would imply the company is benefiting from scale.
However, its revenue less cost of revenue is still not enough to cover R&D and sales and marketing expenses. Its R&D and SG&A expenses fell Y/Y by double digits. However, by my estimation, Snapchat had EBITDA of -335 million, up from -436 million in the year earlier period.
Snapchat have never proven its business model actually works. It could run out of cash before it gets the chance. The fact that it is losing DAUs to Instagram and WhatsApp is likely adding to its loss of subscribers and revenue. It tried to make Rihanna and Chris Brown the faces of domestic violence, but the joke could end up on Snapchat, Evan Spiegel, SNAP investors.
