Snap / Snapchat says in their filings for their IPO “We have incurred operating losses in the past, expect to incur operating losses in the future, and may never achieve or maintain profitability”.

This clearly violates Warren Buffett’s only two rules for investing: Rule Number 1: Never lose money. Rule Number 2: Never forget rule number one!

Warren Buffett strongly believes that the market is often very WRONG about a company’s value in the moment, but eventually the market price will reflect true value. Snap / Snapchat is clearly a company that is far overvalued… it will never turn a profit and will turn into a quagmire like Twitter (which has also always lost money and is slowly sinking).

Twitter has a lot of similarities to Snap / Snapchat: they both are fringe social networks that have never made money and don’t have much hope of doing so. Twitter has LOST half a BILLION dollars every year for the past 4 years on average.  The stock price has slowly sunk from $57 per share to $15 per share.

Another major concern is that Snap / Snapchat is getting crushed by Facebook in all of the important user metrics:

  • The average daily Snap / Snapchat user only spends 25 minutes on their app. The average Facebook user spends over 50 minutes a day on their app.
  • Facebook has 1.86 billion monthly average users, Snap / Snapchat only has 158 million daily average users (they don’t reveal monthly average users to avoid comparisons with Facebook). This means Facebook is 20x larger.
  • Facebook’s platform is far stickier and far superior and draws in a much wealthier and older demographic than does Snap / Snapchat.

If you buy Snap / Snapchat your only hope is that some larger company comes and buys them. Why would anyone be that stupid though?


Published by

Joel Gross

Joel Gross is the CEO of Coalition Technologies.