Our dalliance with Snap’s Spectacles is looking more like a fling than an enduring relationship, judging from information provided in the company’s latest earnings call. Following a rather disappointing second quarter earnings report, Snap’s chief financial officer, Drew Vollero, hosted a call to explain some of the numbers. And perhaps most notable was his announcement that revenue from Spectacles, Snap’s first attempt at hardware, fell during the second quarter.
Vollero told investors that “‘other revenues’ were $5.4 million, substantially all of which was driven by Spectacles.” This figure represents a 35-percent decrease from the $8.3 million Snap reported in the first quarter of 2017. Broadly assuming that all of this revenue came from Spectacle sales, it means that Snap sold around 61,800 pairs during the first three months of the year, and just 41,500 pairs in the second three-month period (Spectacles cost around $130).
But despite these disappointing numbers and the fact that Snap hasn’t been doing all that well overall lately, it doesn’t look as though advertisers are concerned. As Aaron Goldman, CMO of data science and media technology company 4C wrote for Venturebeat, “For advertisers, once a channel reaches a certain scale, it’s going to have a pretty stable place on the media plan.” And luckily for Snapchat, it’s reached this scale. Furthermore, Goldman points out, the Snapchat user base is comprised mainly of 13 to 24 year-olds, among the most valuable of audiences for advertisers. “This audience is not easily found on linear television these days, and the amount of time these people spend with Snap is staggering,” the executive noted. “Furthermore, they’re demonstrating a willingness to engage with brands who create tailored messages as evidenced by the strong video view and swipe up rates we’re seeing among the hundreds of advertisers using our platform to buy Snap Ads.”
And while user growth may not be increasing at the same clip as before, advertising revenue for Snap is skyrocketing. So regardless of Spectacles‘ success (or lack thereof), it seems that many are still quite bullish when it comes to the company’s future.
To be fair, it doesn’t seem as though Snap ever placed much stock in the success of Spectacles, perhaps viewing the product more as a PR and marketing stunt than a real revenue channel. Snap noted in its S-1 prospectus that Spectacles “have not generated significant revenue for us,” and clearly, that doesn’t look like it’s going to change.
All the same, the company has made moves to make the Spectacles more easily attainable. While Snap launched the hardware using pop-up vending machines, it is now selling Spectacles in a number of more traditional locations, both on and offline. You can buy a pair of Spectacles from Amazon or Harrods in London, for example. It’s also worth pointing out that because this broader availability is a relatively new development, the revenue generated from these sales won’t appear until Snap reveals its third-quarter earnings.
However, it could be time for Snap to begin looking to alternative sources of revenue. One possible solution could be Zero Zero Robotics, a drone company that Snap has acquired, and that is known for its selfie-taking quadcopters. While it’s not yet clear exactly what Snap will do with its latest acquisition, it’s not too far of a stretch to surmise that we could soon have Snapchat-branded drones following us around and documenting our every move. Perhaps that will prove a more lucrative enterprise.
Update: Despite Snap’s worse-than-expected sales numbers, advertisers aren’t upset.
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