With this week's Amazon deal for in-app product information, Snap executives must have been hoping the company's submarining share price would head up again. It did, but not for long.
After an initial 3-percent jump after the Amazon announcement, Snap shares sank again, to an all-time low of $8.41 Friday morning, roughly a third the company's opening-day high of $26.05 in March 2017.
Combine the deal news and drooping prices and it's no surprise we're already hearing speculation that Amazon should in fact snap up Snap before it completely goes away.
“Snap needs something,” said New York University marketing professor and L2 founder Scott Galloway, in the first episode of a new podcast series from Recode's Kara Swisher. “I believe this company is going out of business ... Snap will not be an independent company by the end of 2019.”
Galloway's back-of-the-envelope calculation is that, even if Snap's stock drops by half again, it still would cost in the area of $8 billion to $10 billion to acquire.
Relatively few potential buyers have both the resources to write that kind of check and the desire to pick up a social-media company that isn't making money. Given that, Galloway said, Amazon is a likely buyout candidate, especially given the new partnership, which gives it much deeper visibility into the Snapchat audience.
“I think Bezos says, ‘All right, you have a core constituency that buys stuff and buys stuff irrationally,’” Galloway said. “'High-margin coffee, flying knit tennis shoes, they’re crazy. We love teenagers because they’re stupid because they spend all their money.'”
Investors still haven't forgiven Snap for an August earnings announcement that reported that its average daily users, a key Wall Street metric for social-media companies, had dropped 2 percent from Q1 2018, to 188 million. Shares fell even though the same quarterly earnings included higher-than-expected revenues and a lower-than-expected loss per share.
Despite the gloom, media companies are still doing deals with Snapchat. I talked recently with Ocean MacAdams, president of Thrillist, which just launched a travel-focused channel on Snapchat.
"We really felt like travel was a white space on Snap and something incredibly core to what Thrillist does," MacAdams said. "Ultimately it’ll be the full offering of Thrillist," including food, drink and entertainment stories.
MacAdams acknowledged Snap's challenges but said the platform remains an excellent way to reach young audiences.
"I’m aware of their troubles from reading the press but we know that a large portion of our audience is on Snap, and loves Snap," MacAdams said. "Pretty much all the Group Nine brands (which also include Dodo, Seeker, and Now This News) are on Snap and I have to say the response for all of them has been very positive from a partnership standpoint, an audience standpoint, and a revenue standpoint. So we’re very bullish on them."
So despite those flagging share prices, plenty of others have at least minor optimism about Snap's future. Some other recent reasons for their optimism include:
- The Amazon deal. Snap will use Amazon data to deliver product information directly to Snapchat users through the app's camera. The new capability could be a new revenue source for Snap and even its online influencers. That augmented-/virtual-reality shopping mall (surely it's coming) is going to be pretty cool. Snap also rolled out three other shoppable-ad features last week.
- Teens still love Snapchat. Despite that overall user decline, Snapchat remains a favorite of teens, according to several recent studies by the Pew Research Center and others.
- The Saudis still love Snapchat. Or at least one of them does, influential media investor Prince Alwaleed bin Talal, who spent $250 million in August for a 2.3-percent stake.
- Ad revenue continues to grow. A new eMarketer study projected Snapchat's digital ad revenues would hit $662 million this year, and $1.2 billion by 2020. Admittedly, those 2018 numbers were adjusted down, because of Snap's move to an automated programmatic ad-buying system, but eMarketer said revenues should accelerate the next two years.
- Better management, maybe? Evan Spiegel, the company's secretive 28-year-old CEO and co-founder, is reportedly trying to become a better, more public-facing manager, working with a management guru among other efforts. The company also recently relocated much of its staff from rental properties scattered around Los Angeles' Venice neighborhood into consolidated offices at the nearby Santa Monica Airport. The move should reduce the siloed decision-making that dragged on the company's operations.
A sale to Amazon would make sense in a number of ways, giving Amazon another way to connect with young audiences in new ways, especially through those augmented-reality lens Snapchat serves up in such profusion. Those teens and twenty-somethings also already flock to Amazon's Twitch.TV live-streaming site, Prime Studios video, house brands, and other assets.
For his part, Spiegel should ponder the path of other notables who've sold their budding social-media platforms to big competitors.
Just this past week, Kevin Systrom and Mike Krieger, who founded Snapchat's biggest competitor, Instagram, and sold it to Facebook, announced they are leaving amid reports of frustration over constant disagreements with Facebook executives.
And soon after, Brian Acton, who co-founded messaging powerhouse WhatsApp, finally talked in a Forbes interview about why he left behind $850 million in unvested Facebook shares a year ago rather than continue working at the social-media giant. Amid all the recent scandals around Facebook, Acton even used Twitter to publicly join the #deleteFacebook campaign.
So, even as Spiegel ponders his next moves from that office overlooking the Santa Monica Airport runway, he should ponder whether Snap can fly higher with Amazon, or under its own power. A crashing stock price suggests he may need to decide soon.
