Snap Inc.: The company that does not make money
- Alexander Fäh
- Apr 28, 2022
- 2 min read
Snapchat is a social media app used predominantly by young people. Almost 75% of all teenagers use Snapchat, which is nine percentage points more than Facebook. However, Facebook is profitable, unlike Snapchat.
Snapchat has never made any money; image: How-To Geek
Like every listed company, Snap Inc. published its quarterly report. Although revenue rose to over a billion dollars for the first time, the company is not profitable. The loss amounted to just under $360 million.
This balance sheet is unsurprising, however, if you look at Snapchat's previous reports. In 2021, the company made a loss of over $286 million, in 2020 it was $306 million, and in 2019 it was $310 million. In the year Snap Inc. went public, the loss was even over $2 billion.
Why isn't Snapchat making money?
But why is Snapchat only making losses? Like every major social media app, Snapchat is heavily dependent on advertising. To make this advertising model profitable, individual users need to be on Snapchat longer to view ads. On average, Snapchat made $3.20 per user in the first quarter, according to the report. Multiplied by the 332 million users worldwide, that amounts to $1.062 billion in revenue.
However, Snapchat also has very high expenses. However, if all taxes, interest and depreciation were removed from the report, Snapchat would actually be profitable.
Apple has also recently increased privacy for their part, so Meta and Snap can no longer use the data of Apple users.
And the investors?
Many Wall Street analysts say in different magazines that the Ukraine invasion is limiting revenue growth as advertising campaigns have stopped. Likewise, many of Snapchat's users use an iPhone or other Apple device. This has made it difficult for the company to know how well its advertising is performing.
Currently, one Snap share has a value of $27.09 with a market valuation of $44.33 billion. However, this had seen better times as well. Currently, the stock is 67.4% away from its last all-time high.
