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What Does Snap Spend on Product Development?

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One-third of revenue spent on product development

Snap (SNAP) spent $95 million on product development projects in the third quarter of 2018, with this amount representing 32% of the revenue it generated in the quarter. Twitter (TWTR), Facebook (FB), and Alphabet (GOOGL) spent 20%, 19.7%, and 15.4% of their revenues, respectively, on product development projects, in the third quarter. Amazon (AMZN) and PayPal (PYPL) spent 12.7% and 7.3% of their revenues, respectively, on product development projects in the quarter.

In the last three quarters, Snap’s product development spending as a percentage of its revenue has been on the decline. The 32% of revenue it spent on product development in the third quarter was down from 37% in the second quarter and 44% in the first quarter.

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Snap seeks distinction as Facebook copies its features

With Facebook duplicating some of Snapchat’s distinctive features, Snap may want to keep pumping more money into product development initiatives to try to set itself apart from the competition. 

Late last year, Snap launched a localized version of its Discover feature in India, India Today reported. A localized Discover feature in India can be viewed as part of an effort by Snap to popularize its service in the country. Google also launched a localized mobile payment service called Tez in India in 2017 as it sought to take advantage of the rise of online shopping in the country.

For Snap, the advertising revenue opportunity in India is enormous. Digital ad spending in the country is expected to hit $3.2 billion in 2021, according to estimates by Zenith Media.

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