Snap Inc. (NYSE: SNAP) earnings were so bad that it is hard to see how the company will survive as a standalone public corporation. The markets drove Snap’s stock down 28% when the figures were announced.
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Snap’s revenue rose 13% to $1.1 billion. This level of growth is glacial among social media companies. Snap lost a breathtaking $422 million in the quarter. To make matters worse, the number of daily active users rose 18% year over year to 347 million. That means Snap has not been able to effectively monetize its growing base. Snap said the road ahead was too hard to forecast, so it provided no guidance, a rare occurrence since COVID-19 robbed companies of their ability to do so.

Evan Spiegel, the company’s CEO, made a predictable statement: “We are evolving our business and strategy to reaccelerate revenue growth, including innovating on our products, investing heavily in our direct response advertising business, and cultivating new sources of revenue to help diversify our topline growth.” He is the architect of Snap’s failure. He has been chief executive since 2012. The board at most public corporations would have fired him a long time ago.

Snap has taken shareholders on a brutal ride. Shares are off 75% this year. By contrast, social media leader Meta’s shares have dropped 50%, a terrific pounding.

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Snap may make a good acquisition target for a larger company that wants to expand its social media presence or add one to its primary business. Snap has $6 billion in cash and investments on its balance sheet. Its market cap is less than $20 billion.

Snap, like Twitter and other midsized social media companies, never had enough scale to be successful. Now, that scale problem has caught up to it in a way that markets cannot stomach.

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