Is Snap’s Business Diversification Collapsing?



Ad-funded companies seeking new revenue sources

Amid tightening competition for digital advertising dollars, many ad-funded companies have sought to diversify their revenue sources by venturing into non-advertising operations. Alphabet (GOOGL), for instance, has diversified into making hardware products and has entered the taxi business through its Waymo subsidiary.

Facebook (FB) is also into the hardware business through its Oculus subsidiary. Twitter (TWTR) licenses its data to brands and developers to make money outside advertising. On its part, Snap (SNAP) has tried its luck in the hardware and digital payment businesses in efforts to diversify its revenue sources. Alphabet, Facebook, and Twitter all reported rises in their non-advertising revenues in the third quarter of 2018.

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Snap shut down its Snapcash service

While Alphabet, Facebook, and Twitter have made advances in their business diversification efforts in recent quarters, Snap has little to show for its business diversification push. Last year, in what seemed like a blow to its business diversification quest, Snap shut down its mobile payment service, Snapcash, after it failed to live up to expectations, TechCrunch reported. Snapcash was a peer-to-peer payment service backed by Square (SQ).

In another apparent diversification setback, Snap didn’t break out its revenue by product in the third quarter, indicating that Spectacles sales may not have been meaningful in the period, likely leaving Snap more dependent on advertising sales.

Snap generated $298 million in revenue in the third quarter. The company is scheduled to report its results for the fourth quarter of 2018 on February 5.


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