Snapchat Stock: Product innovation is driving Snapchat's growth - The Average Joe

    Snapchat Stock: Product innovation is driving Snapchat’s growth

    Kevin Roche — Analyst

    April 13, 2021

    Snapchat stock

    April 13, 2021

    Snap isn’t the disappearing chat app you once thought it was.

    Snapchat stock: With a focus on e-commerce/augmented reality (AR) and addiction with pumping out new products — Snap is positioning itself for years of rapid growth. 

    Launch, expand, repeat

    With usage surging during the pandemic, Snap has grown into so much more than a casual way to share your social life.

    Having launched 15 AR products in the past year, Snap approaches product experimentation similar to Facebook ($FB) – launch new products and see what sticks. Some of its more successful product launches include:

    • Spotlight, a TikTok-like feed for user-created video, launched in Nov. 2020.
    • Snap Map, a map product that shows friend locations, launched in 2017 — and is estimated to generate an extra $1.5b in ad sales by 2023.

    A relentless focus on product innovation is leading to it forecasting multiple years of 50%+ sales growth — and a 270% rise in Snapchat stock price since the start of 2020 (before COVID).

    E-commerce isn’t killing malls, Snap is 

    Advertising on AR products is expected to grow into a $4b market over the next few years — and Snap is positioning itself to benefit from this growth by:

    • Acquiring fit Analytics, whose tech helps shoppers find the right fit while shopping online — to expand its e-commerce shopping tools.
    • Acquiring Screenshop, the “Shazam of fashion” app that generates clothing recommendations from photos.

    These products complement Snap’s existing AR try-on product and Bitmoji fashion products. Snap is building out a shopping power app and it’s sending a message: If you’re a fashion brand, advertising on Snap is a must.

    But launching new products is only one part of the equation. The other — making money from these products.

    For investors… More ads, more growth in Snapchat stock

    Big losses have been an ongoing problem with Snap throughout its existence— which has gotten slightly better in recent years.

    • In 2017, Snap made $825m in sales but lost $3.4b — i.e Snap spent $4 to make $1 in sales…
    • In 2020, Snap made $2.5b in sales and lost $945m — a big improvement.

    In 2020, Snap made $2.55 per daily active user (DAU) compared to Facebook which made $32.03 per DAU (this is why your Facebook app is filled with ads — they know how to monetize).

    Snap has the right experimentation mindset but to succeed, it’ll have to figure out how to jam more ads into these products.

    Learn more: Snapchat stock isn’t the only social media stock surging to all-time highs

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