TO INFINITY AND BEYOND

Snap is trying to prove it can stay ahead of Facebook

Obsession
Messaging
Obsession
Messaging

Snapchat unveiled a few new features today, and at the time of publishing, Facebook had not yet copied them.

The ephemeral messaging app now lets users send messages for as long as they’d like (previously picture messages were limited to 10-second clips). Users can now also infinitely loop any videos posted to their daily Stories page, instead of the video disappearing as soon as it’s finished. There are also new drawing tools: Users can now draw shapes with emoji (instead of just colored lines), and there’s a “magic eraser” tool that’s supposed to erase parts of an image and replace them with what the app believes is in the background, although it’s not quite so accurate yet:

These updates come a day before Snapchat’s parent company Snap announces its first quarterly earnings as a public company, after debuting on the New York Stock Exchange in February. In its public filings, the company said it had 158 million daily active Snapchat users for the quarter ending Dec. 31, and 161 million for the month of December. Facebook-owned Instagram announced a knock-off of Snapchat’s daily story function in August, and by April, it had amassed more users than Snapchat itself.

While Facebook’s product is not an absolute corollary—people use Instagram and Snapchat for different reasons—many argued that it was telling for Snap’s future that the world’s largest social network could spin up a competing service and have it garner so many users so easily. Snap will need to show on its earnings call that it’s growing—that it’s not the next Twitter—but equally important is its ability to continue innovating. If Snap can’t keep churning out new ideas, inertia will likely keep Facebook users on its apps.

The company also needs to show growth in its advertising business, which accounts for the overwhelming majority of its revenue. Snap lost $514 million in 2016, up 38% from the $372 million it lost in 2015, but it is figuring out how to generate revenue: It brought in $404.5 million last year, up nearly 600% from 2015. The company recently unveiled a new advertising management product that will make it easier for brands to target and buy ads at scale within Snapchat, but although this will likely be welcome news to advertisers, according to Axios, it won’t be rolled out until June, so it won’t be reflected in the latest quarter’s earnings.

Analysts are expecting revenue around $159 million, and an increase in daily active users to about 170 million, according to CNBC.

Wednesday’s earnings call will be the first real indication of how Snap will behave toward its investors, especially given that anyone who bought stock floated during the IPO has no say on how the company runs. Unlike other publicly traded companies, Snap has three types of shares—ones with 10 votes, ones with 1 vote, and ones with 0 votes—co-founders Evan Spiegel and Bobby Murphy hold all of the 10-vote shares, other executives and pre-IPO investors have the 1-vote shares and the public that invested in Snap was left with no votes.

Spiegel, also CEO, has been characteristically quiet since Snap went public, and some are speculating he won’t even be on the call. While it wouldn’t be the first time that a CEO of a technology company hasn’t given a statement on their company’s quarter earnings call (Alphabet’s CEO tends to let subsidiary Google CEO Sundar Pichai lead the company’s calls), it would be unusual for a company’s first earnings call. Given the pressure Facebook has put on Snapchat’s core products in the last few months, investors will want to hear from the man who was compared to Apple’s visionary force of will, Steve Jobs, during Snap’s IPO roadshow (paywall). Hopefully for Snap’s investors, Spiegel, or his deputies, will tell us how they plan to take on Facebook in the coming months and years.

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