According to analysts at a Wall Street research firm, Snap, the parent company of Snapchat, may need to go private if it cannot find better ways to monetise and keep users on the social network for longer.
The company began publicly trading its shares in March 2017, but lost US$20 billion in market capitalisation. Since then, Snap has struggled to attract new users to its platform.
Brian Wieser, senior analyst at Pivotal Research Group, told CNBC that the data observed in the research is showing an increasingly large user base, although the time spent on the platform is collectively decreasing. "Our view is that it is not too late for management to find ways to reverse recent usage trends and improve monetisation."
According to Wieser's analysis, if Snap is unable to achieve these two goals in the short term, the company could become an attractive candidate for investment with the share price at current levels.
With strong competitors such as Facebook and Instagram, Snapchat has invested in advertising, which has annoyed users of the social network, as has the new design implemented in February.
Analyst Michael Nathanson of MoffettNathanson wrote last Tuesday (9) that the company was not prepared for the IPO, reducing 2019 revenue estimates by 7%.
Wieser also makes an interesting observation: companies that sell digital advertising, such as Snap, Facebook and Twitter, are impacted by low barriers to competition and government regulations related to user privacy.
Source: CNBC