Snapchat’s parent company Snap has experienced yet another failure as its attempt to diversify into hardware has failed to live up to the company’s own expectations.
Initial predictions were bold, especially after a guerrilla marketing initiative that included retail stores and spectacle vending machines. The resulting hype meant that people were lining up for hours to buy spectacles, and be part of this new and exciting product launch.
Snap executives, apparently believing their own press, ordered enormous amounts of the new product in order to handle the demand they were sure was coming. But the excitement of being part of a crowd in Manhattan or San Francisco is far more significant than purchasing something online, and after the product was made available to the general public, sales stagnated.
Importantly, this had nothing to do with the product itself, which had received excellent reviews both from a technology and creative standpoint. But as with almost every attempted transition from online technology to product, the results simply weren’t there. Facebook, Google, and Amazon are all victims of spectacular transitionary hardware failures.
Snap now finds itself in an awkward position. It’s attempted acquisition of a drone company in China has apparently failed, due in no small part to a $200 million price tag, and rumours abound that members of the 129 strong Snap hardware team are being encouraged to look for other opportunities. While this is not a good sign, it is certainly a necessity if the business is to remain viable long-term, or at least yield some returns. The current share value is sitting far below the original IPO level.
At the beginning of the year, snap had around $2 billion in its war chest, but they are ploughing through that, even while spectacles sit in warehouses around the country. The company spent $400 million in the first quarter of this year, and end of year financial results could be disastrous, and mean a refocus for the business.