Snapchat lost $443 million in one quarter

It's pretty hard to not relate Snapchat's public market woes to Twitter's early days: the company reported its earnings yesterday and it was, quite frankly, a disaster. In just one year the company's quarterly losses doubled from $124 million to $443.

That's right, Snapchat spent half a billion dollars in a single quarter. Not only did it spend that much, Snap also had more than $40 million in unused Spectacles hardware - that's devices sitting in warehouses rotting because it overestimated consumer excitement. 

Look, Snap is in trouble here. Facebook's advertising machine, Instagram, is rapidly outpacing its growth while the company flounders in the market. Snap has just 178 million active users while Instagram Stories skyrocketed to 300 million - and Snap added just 4 million new users, half of what was expected.

There are a few things to pinpoint: Snap has made the exact same mistake Twitter did in its early days and pinned its IPO to 'active user growth' metrics rather than something more sustainable such as time spent. Twitter was punished for years by investors who expected it to match Facebook's billion active users despite there never being a way to reach that target.

Snap is also just well behind in monetization efforts. Most advertisements are manually sold and the company is dragging its feet on automated ads and - surprise - Snap found out that advertisers competing for automated ads means ad prices aren't as high.

What to do when your business is cratering then? Well, keep spending: Snap plans to redesign the entire app to make it "easier to use" and expects a material impact on its bottom line as users get accustomed to it. 

Is that a good idea? Er, it feels a little soon, and it's hard to avoid drawing parallels to Twitter's repeated insistence that the issue was people just get confused by the product and that they could fix it by dumbing down the product (hint: didn't work).

Why this matters: Snap's IPO was probably the final shot across the bow for social networks on public markets. Do people need another publicly traded thing for messaging blobs of data to each other? Maybe not. If they flounder continually, investors won't want to play here anymore at all and we'll likely see the end of that type of product getting big.

Tab Dump™

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