Editing Snap
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* Competition – Snap competes primarily with Facebook and Google, including Facebook’s Instagram, Messenger, and WhatsApp platforms, and Google’s YouTube platform. All of Facebook’s major platforms have introduced replicas of Snap’s key ephemeral content feature, as well as Stories clones. Competition will probably not draw many current users away from Snapchat entirely in our view, but could negatively impact engagement which could cause a decline in DAUs. Increased competition will also make it more difficult for Snap to attract incremental new users to the platform. | * Competition – Snap competes primarily with Facebook and Google, including Facebook’s Instagram, Messenger, and WhatsApp platforms, and Google’s YouTube platform. All of Facebook’s major platforms have introduced replicas of Snap’s key ephemeral content feature, as well as Stories clones. Competition will probably not draw many current users away from Snapchat entirely in our view, but could negatively impact engagement which could cause a decline in DAUs. Increased competition will also make it more difficult for Snap to attract incremental new users to the platform. | ||
* Highly sensitive model and volatility – our financial projections are very sensitive to several metrics, including ARPU, DAUs, and CoRPU. The DAU metric, is itself a very sensitive measurement, given that user behavior and seasonality could cause material swings, as discussed on page 10. If the company underperforms on any one of these metrics in a given quarter, it could materially impact revenue and profitability. Given that management does not plan to provide any guidance on financial metrics or user metrics such as DAUs or ARPU, we see added sensitivity to reported figures, and potential for a wide range of estimates included in consensus. | * Highly sensitive model and volatility – our financial projections are very sensitive to several metrics, including ARPU, DAUs, and CoRPU. The DAU metric, is itself a very sensitive measurement, given that user behavior and seasonality could cause material swings, as discussed on page 10. If the company underperforms on any one of these metrics in a given quarter, it could materially impact revenue and | ||
profitability. Given that management does not plan to provide any guidance on financial metrics or user metrics such as DAUs or ARPU, we see added sensitivity to reported figures, and potential for a wide range of estimates included in consensus. | |||
* Execution risk – Snap’s executive team does not include any individuals with prior C-level experience at public companies. Additionally, the company has a short operating history, and plans to rapidly scale its operations and workforce. Less than 1/3 of the workforce has been with the company for a year or more, and we expect new hires (tenure less than 12 months) to make up the majority of the workforce through at least 2018. We see material risk to execution as the company expands internationally, and ramps up its sales force and engineering efforts. | * Execution risk – Snap’s executive team does not include any individuals with prior C-level experience at public companies. Additionally, the company has a short operating history, and plans to rapidly scale its operations and workforce. Less than 1/3 of the workforce has been with the company for a year or more, and we expect new hires (tenure less than 12 months) to make up the majority of the workforce through at least 2018. We see material risk to execution as the company expands internationally, and ramps up its sales force and engineering efforts. | ||