Five years ago, Snapchat was the hottest thing around, more popular among users than social media kins Facebook and Instagram.
These days? Not, so much.
sooo does anyone else not open Snapchat anymore? Or is it just me… ugh this is so sad.
— Kylie Jenner (@KylieJenner) February 21, 2018
Since February, around the time a single Kylie Jenner tweet wiped out $1.3B in company value, Snap has dropped from a public valuation of $24B to $14B.
And get this: According to its Q2 report, Snap users are dropping like flies. Since Q1, a whopping 3M users have ditched Snap—the first time user count has dropped quarter-over-quarter in the company’s history.
And yes, Facebook has taken some legal hits lately, but Snap could be facing a battle much bigger.
If you can’t buy ’em, steal ’em (their users, that is)
While users are dropping en masse, Snap still sports a robust 188M daily user base. But competition from rivals is getting more intense by the day.
Facebook—who actually tried to buy Snap for $3B in 2013—saw its user base increase to 1.47 billion over the same period.
And powered in large part by their Snapchat story clone Instagram Stories, Instagram has grown to 400M users—more than double Snap’s user count.
Oh, it gets worse.
WhatsApp, another Facebook property, has their own version of Snapchat’s major value prop (WhatsApp Status), leaving you wondering exactly what Snap has to offer.
Users could be wondering the same.
For whatever it’s worth, while Snap’s user count has eroded, WhatsApp has seen a healthy spike in active users, peaking at nearly 450M.
Facebook Stories (at this stage, you get the point) boasts of over 150M users, as well.
When the decline began…
In the chart, we can see that Snap’s user growth has been severely impacted post the release of Instagram Stories two years ago. While Snap’s daily active users (DAU) rose 48% year-over-year in 2016, it fell to 18% towards the end of 2017. An extremely telling blow.
But it’s not just Zuckerberg…
From a business model standpoint, Snap is similar to the other internet blue-chippers (think Facebook, Google, Twitter, etc.). Their revenue is pretty much all advertising income; a total of 97% in 2017.
But that’s pretty much where the comparison ends. Unlike the other tech giants, Snap must be thinking they’re Big Meech or Larry Hoover, because they are blowing money fast.
Compared to Facebook, Twitter and Google—which have gross margins of 85%, 67%, and 57%, respectively—Snap has a paltry gross margin of 20%.
Yes way. Snap’s expected to continue to post negative margins in the short term. And they will need to figure out how to boost their average revenue per user (ARPU) substantially if they even want to think about being profitable.
Initially billed as the new Facebook, Snap has pretty much struggled to keep up according to every relevant metric since its IPO.
Facebook, on the other hand? Sure, they had a rough start when they debuted on Wall Street in 2012. But since then, Facebook’s enjoying healthy profits, racking in billions of dollars after tax.
And more importantly, Facebook’s market value has 10X’d, jumping from a $50.92B low to $520B as of Aug. 31, 2018. (They’ve been as high as $615B on July 16.)
So what can Snap do?!
Hard to say. It’s not just Facebook that’s kicking Snap’s rear end. They’re also way behind Twitter in terms of profitability.
In order for Snap to catch up with Twitter’s current growth, Snap will have to increase annual revenue by 46%.
Snap reports its first decline in daily active users, becoming the latest social-media company to post disappointing user growth https://t.co/u5KKslz0fk
— The Wall Street Journal (@WSJ) August 7, 2018
Facebook recovered after a rough start, why won’t Snap?
Valid point, yes. But a couple of key points to consider. For one, Facebook was already the most sought-after social media platform when it went public. That wasn’t really the case with Snap.
And secondly, in order to achieve robust revenue growth, Snap will have to gain market share from Facebook—basically steal its users back. And at this point, that looks almost impossible.
But crazier things have happened. Snap away, WealthGANG…
CHART: How Blockchain Powers Bitcoin
Blockchain, Bitcoin. Bitcoin, blockchain.
The two terms go hand in hand—and have become almost ubiquitous with this year’s insane rise (and fall) of Bitcoin.
But what does it all really mean? How does it come together? In this week’s chart, our friends at CB Insights break down exactly how blockchain powers Bitcoin.
This Mogul Became America’s 1st Black Billion-Dollar Businesswoman
Where to start?
She’s the first black billion-dollar businesswoman. Before Oprah Winfrey.
She started as a TV executive, founding Black Entertainment Television (BET), the first TV network targeting African Americans. She then became a real estate mogul.
Oh, she also owns a stake in three major sports franchises, the NBA Wizards, NHL Capitals and the WNBA Mystics, the African American, period, to boast that claim.
In honor of Black History Month, let’s dive into her remarkable career.
- Born Sheila Crump in McKeesport, Pennsylvania, Johnson co-founded BET in 1979 with then-husband Robert Johnson. The couple sold it to Viacom in 2000 for $2.9B
- Sheila Crump Johnson became the first African American woman on the Forbes’ Billionaire list in 2000—beating Oprah Winfrey to the distinction.
- Per Forbes, Johnson has an $820M net worth as of 2019
Foray into real estate…
After closing the sale to Viacom, Robert and Sheila pocketed around $1.5B each. Johnson used that windfall as seed money to build a hospitality real estate empire in 2005.
“There’s a disparity in paychecks between whites and blacks,” she told the Wall Street Journal. “I will never forget that.”
As CEO of Salamander Hotels and Resorts, Sheila controls a spectacular portfolio of six luxury hotels in Florida, Virginia and South Carolina. And she’s built it from the ground up—literally—in her own spirit.
“I’ve been to many hotels, not only in the US, but all over the world,” she told Forbes last year. “And I wanted to find something that was going to really make Salamander stand out beyond all of these hotels.”
So what does that mean?
“You have to understand, there are a lot of people, investment companies, with very deep pockets,” she says. “They can do it, but they don’t have the experiences that we’re able to bring. I am constantly trying to find a way to help Salamander Resort & Spa stand out head over heels above any other hotel — not only in the area, but in the nation.
“I want them to leave that resort wanting to come back and not just say, ‘I’ll be back in six months.’ I want them to come back all the time.”
And so far it’s worked. In fact, on Forbes Travel Guide’s 61st list of Star-Rated hotels, Johnson’s Salamander Resort & Spa outside of Washington, DC earned a Five-Star distinction.
Forbes: “Everything [she] touches turns to gold.”
That’s a real quote. From Forbes. Last year. It’s also true.
BET? Billion-dollar exit. Washington Capitals? Stanley Cup.
And Roma. Won 10 Oscars. Who showed it before a single soul started caring? Johnson’s Middleburg Film Festival. (Which, by the way, has 32 films and counting in Academy Award contention.)
Remember her golf resort at Innisbrook? Oh, yeah. Hosts the Valspar Championship, one of the PGA calendar’s most-anticipated tournaments.
Becoming a billionaire comes with a new level of clout as well. “When you don’t have money, you’re not invited to special events; you really don’t matter,” she told WSJ. “It’s a society thing.”
So instead, she’s turned to giving back. Her Sheila Johnson Fellowship’s paid for more then 40 scholarships at Harvard University for students who otherwise wouldn’t afford to attend.
Breaking glass ceilings.
There’s an alarming statistic in business and diversity—especially as it pertains to women. According to research by investor Richard Kerby, 18% of all VCs are women—and only 3% are black. In addition, less than 50 black women ever have raised $1M in funding.
“When I got started,” Johnson says, “I couldn’t get a loan. I had to use my own money to get Salamander Resort and Spa.”
She explained to WSJ last year that men can go to any bank with a bank proposal. And no matter how “wacky” the idea is, she said, “they’re going to get the financing. Women do not have that ability.”
Johnson’s taken it upon herself to do something about that, becoming one of the founding partners of WE Capital, an investment firm that invests in female entrepreneurs.
“I started out in a very unique position where I had my own capital to be able to get started,” she says. “But there have got to be banks and investors that believe in helping women who want to be entrepreneurs in the hospitality business.
“And it’s just really, really important that they really take a look at this.”
100% Immediate Expensing Won’t Help Bring Back American Jobs
As the country continues to battle the health and economic crises brought on by the Coronavirus pandemic, leaders and policymakers in Washington are considering a number of tax-related measures to hasten recovery and stimulate the economy in the wake of this generational crisis. One such proposal would expand full and immediate expensing to include structures. The popular thinking is that this measure would incentivize companies to invest in US facilities, including and especially those companies who have historically opted to offshore much of their manufacturing footprint. While this proposal is certainly well-intentioned, if enacted it would have far more negative consequences, and far fewer benefits, than many realize.
It is important to remember that the tax reforms of the 1980s tried this approach, accelerating depreciation to 15 years for real estate in an attempt to stimulate the economy. While thoughtfully considered, this measure resulted in massive overbuilding and the use of real estate as a tax shelter, a dynamic that contributed significantly to the savings and loan/real estate crisis at that time. As a result, the depreciation schedule for structures was eventually lengthened to better reflect the true useful life of a structure or real estate. While measures were put in place to try to prevent entities using the construction of buildings as a tax shelter, there are ways to get around the rules. Expanding immediate expensing to include structures today would incite the same unintended consequences the U.S. experienced in the 1980s.
Some economists continue to cite that immediate expensing of structures, to include manufacturing plants, office buildings, and commercial real estate, would contribute substantially to the growth of gross domestic product and encourage companies to return to the U.S. However, these assumptions are flawed as they do not account for the tax consequences and restrictions unique to real estate, which prevent immediate expensing for structures and buildings from yielding the same economic benefits that may result if applied to other capital expenditures.
These models also do not reflect the very real dynamics of a post-COVID-19 business environment. In the last few days, some of our country’s largest employers including Facebook and Twitter have offered their employees extended teleworking flexibility well after a phased re-opening of America begins. COVID-19 has shown that through technology, a large number of employees are capable of being highly productive working from home, providing an opportunity for companies to shed tremendous office space costs from their books, and leaving uncertainty to the future need for office space in the U.S. We cannot afford a situation where office buildings are built for tax benefit rather than market need.
Most economists’ models that demonstrate GDP growth from the inclusion of real estate in full and immediate expensing do not factor in basic real estate tax rules, such as, recapture taxes, passive loss, basis, at-risk limitation rules, or other market drivers, as well as company valuations and shareholder requirements. They also often rely on European data that does not effectively reflect U.S. economic realities. As a result, many of these models overstate both the increased investment that would result from immediate expensing, as well as the extent to which immediate expensing would incentivize U.S. companies to re-shore production lines and facilities currently located overseas.
Also of great concern is the possibility that providing immediate expensing for structures will greatly increase the incentive to utilize debt financing, which many economists believe is already too attractive. Take, for example, an investor purchasing a $10 million building with $8 million in debt financing and just $2 million in equity. Under immediate expensing, that investor would receive a $10 million tax write-off despite having only expended roughly $2 million. This is a dangerous tax loophole that could hinder the U.S. recovery from the economic fallout of COVID-19.
Finally, there is the cost. The most recent estimate conducted by the Tax Foundation found that providing full and immediate expensing for structures would cost the Treasury nearly $1 trillion over the next ten years. While many agree that repairing the damage COVID-19 has wrought to our economy will require significant and innovative government support, there are better ways to stimulate growth and encourage U.S. companies to re-shore their innovation and manufacturing capabilities that do not carry the same unintended consequences.
Fortunately, there are much stronger alternatives to bring companies and innovation back to the United states, to lessen our reliance on foreign countries, and to support small businesses in the wake of COVID-19. Allowing companies to continue to immediately expense research and development and equipment expenses, providing manufacturing facility credits to companies committed to stay in the U.S. and on-shore, developing a robust, but low risk government backed loan program to support critical next generation technology development and manufacturing in the U.S., and providing a more immediate payroll tax holiday for small businesses and individuals. These types of highly effective actions that would result in a more impactful near-term and long-term stimulus to the nation’s businesses and job opportunities for Americans.
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