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Report: Snap chasing profitability by year-end

Snap CEO EVan Spiegel. Photo: Steve Jennings/Getty Images for TechCrunch

Snap CEO Evan Spiegel sent a company-wide note to employees "several months ago" outlining a zealous goal to break even in 2018, according to The Information.

Why it matters: It's a very ambitious goal considering Snap lost $720 million last year and analysts expect the company to continue to lose money this year. While the company has been steadily increasing its average revenue per user, it has invested some cash flow into other parts of its business, like marketing and research and development, which has eaten at its profitability.

Our thought bubble: It makes sense that Spiegel, the CEO of a now publicly-traded company, would aim for profitability, although the timing seems rushed. The company increased adjusted losses by roughly 56% year over year in 2017.

The report does not specify on which terms the company would break even — ie. based on EBITDA, GAAP profitability or free cash flow. However, it can be assumed from the company's Q4 earnings report that increasing margins on revenue, mostly through developing its advertising capabilities and expanding into new markets, will be a major factor in helping to drive revenues past costs to hit profitability.

Cost-cutting through restructuring of staff and resources could also be a means of increasing margins, although staff layoffs as of late seem more about strategic direction of specific departments than an effort to cut costs to drive profitability.

  • Snapchat CEO Evan Spiegel said last year that all managers would be assessing their team sizes and locations, which could mean hiring, cuts or no change.
  • Snapchat recently laid off 120 engineers, the biggest round of layoffs to-date. According to an email obtained by Cheddar from Snap's Head of Engineering Jerry Hunter, the layoffs are part of a larger effort by the engineering team to replace less experienced talent with higher-performing technical experts.
  • Snapchat laid off roughly two dozen human resources staffers in January as an effort to cut back on hiring upon having reached a point of maturity at around 3,000 employees.

The company has faced increased pressure from investors to focus on revenue growth and profitability in light of missing earnings in its first few quarters as a public company. Snapchat did show significant improvement in its fourth quarter as a public company, surprising investors that had modest expectations for the camera company.

  • At the time analysts argued that the bar was set low for Snapchat, and that it still had a long way to go until raising revenues enough to hit profitability.
Lauren Meier 1 hour ago
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Facebook's growing problems

Illustration: Rebecca Zisser/Axios 

Facebook is caught in the middle of a rapidly unfolding scandal over Cambridge Analytica's improper gathering of data on millions of users, and what that exposed about the company's data collection. The fiasco has drawn the interest of lawmakers and regulators and rekindled the debate over its role in the 2016 presidential election.

Why it matters: The bad headlines continued to pile up; "A hurricane flattens Facebook" said Wired, "Silicon Valley insiders think that Facebook will never be the same" per Vanity Fair, "Facebook is facing its biggest test ever — and its lack of leadership could sink the company" from CNBC, and — as we've yet to hear from the company's top leaders — "Where is Mark Zuckerberg?" asks Recode.

Dave Lawler 7 hours ago
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What Trump and Putin did and didn't discuss

President Trump spoke with Vladimir Putin this afternoon, and congratulated him on winning re-election on Sunday. After the call, Press Secretary Sarah Sanders was asked whether Trump felt the election had been free and fair, and said it wasn’t up to the U.S. to “dictate" how Russia holds elections.

The bottom line: Trump is not alone in congratulating Putin — leaders in France, Germany and elsewhere have done so this week, as Barack Obama did in 2012. But past administrations certainly have seen it as America’s role to call balls and strikes when it comes to elections abroad, and weigh in when democratic institutions are being undermined. A departure from that approach would be welcomed not only by Putin, but other leaders of pseudo democracies around the world.