You know that familiar scene in the horror movie, the one where the good guy seems all but left for dead—beaten to a bloody pulp by his evil nemesis, lying inert on the ground, perhaps with a knife sticking out of a gaping leg wound, or with a few teeth missing—and yet (and yet!), right at the consequential moment when the bad guy flicks his cigarette and walks away, our hero somehow musters the strength to defy his wounds and exact his own form of vengeance? Well, that’s more or less how Evan Spiegel, the co-founder and C.E.O. of Snap, felt this week. Snap, which has been fighting uphill against the narrative that it’s no longer cool, and no longer growing, and a victim of Instagram’s phenomenal growth, turns out to be alive and well. Earlier this week, the company announced that it added 9 million daily active users, bringing its total audience up to 187 million people per day, defying virtually all expectations. Furthermore, Snap’s revenue grew 104 percent from a year earlier, which offered a stark rebuke to those who predicted, as recently as a year ago, that it was toast and would be sold off for parts. As a result of all this good fortune, Snap’s stock rose with the velocity of Falcon Heavy, rising from $14 a share to $21 in a single 24-hour period, making up for several months of losses, and returning the company’s market capitalization to $25 billion. The company is now on par with Twitter, which also saw its stock and market value shoot up this week after a similarly impressive, and surprising, quarterly earnings report.
This auspicious twist of fate for both Twitter and Snap concurred, it must be noted, with Facebook’s announcement that the platform shed nearly one million daily active users in the United States and Canada during the course of the same quarter. Coincidence? Maybe, but also a slap in the face for Facebook—get it, slap in the face?!—which spent the past decade trying to buy or destroy Twitter, and almost all of last year copying Snap and its features in an attempt to vanquish the popular upstart. This recent good news certainly doesn’t mean that Snap is in the clear, or that 2018 will be a rollicking year for Spiegel. It also doesn’t mean that Jack Dorsey can look forward to issuing self-congratulatory tweets for the next four business quarters. As anyone who has competed with Mark Zuckerberg knows, he fights to the death, and squishes people and companies without much fanfare. If they’re still alive after Zuckerberg’s first attempt, he keeps belting away at them.
Yet this reputation didn’t stop Spiegel, who knew he couldn’t prevent Facebook from stealing his ideas. Instead, he decided to double-down on what Snap does best: product design. As a result, Snap has redesigned its app, made it simpler and more intuitive (though some users think it’s more complicated), and begun a huge push to recruit new users on the Android platform. Twitter, on the other hand, has focused on what it’s good at, too: letting people yell at each other in the simplest and most concise way possible. (Just look at the replies to Dorsey’s congratulatory tweet to the Twitter team to see exactly what I mean, with most responses telling Dorsey to “remove your head from your ass, dude,” or to “Ban Trump.”)
Of course, Dorsey, Zuckerberg, and Spiegel all know that they are still at the beginning of a long battle for social-media dominance, as competition intensifies, audiences migrate to other pleasures, and a concerned public wonders if such products are facilitating the demise of our culture. And Spiegel could soon face challenges that make a scrap with Zuckerberg feel like a playground tussle. Snap reported on its earnings call that it had losses amounting to around $350 million for this past quarter against revenue of $286 million, up from $208 million the quarter earlier. This was one reason the stock went straight upwards after earnings; stock analysts had been expecting a loss of around $409 million, with around $255 million in quarterly revenue. Most of those costs—around $131 million—came from all the photos and videos Snap has to host, according to the company’s presentation, which means Snap also has an obvious avenue to pare its losses. But if those hundreds of millions of dollars in expenses don’t start to come down and meet revenue, which so far is going up, investors will become very unhappy, very quickly. This, of course, is a reality that Dorsey knows a thing or two about.
Spiegel has other problems, too. Snap’s core users are largely teenagers, who have about as much allegiance to a platform as Donald Trump does to his White House staff. These teens can jump from one service to another like a flock of starlings in murmuration, and Snap remains at constant risk of losing business to the next shiny thing. Just ask Twitter what that’s like, too: the company has had well over a billion people sign up for Twitter, only to see hundreds of millions leave and never come back. Twitter, it should also be noted, is a company that went public in 2013 and only became profitable for the first time just this week.