| Devils advocate here. You overlooking quite a few things. Realistically, let's break some things down: Background: Google Glass Cost: $1,500 for early adopters (irrelevant)
Cost to Manufacture: ~$100 USD
Sale Price: $299
Margin: ~33% (low)? Probably. Yes! Yes with economies of scale...blah....blah...blah... Let's assume (I'll use the 150M, but I don't want to): A. 5% of their 150M userbase that's 7.5M * $130 = $1B USD
B. 5% of their 150M userbase that's 7.5M * $89 = $668M USD
C. 5% of their 150M userbase that's 7.5M * $50 = $375M USD Let's play with some more numbers because I think 5% is super generous. Why? Yes, Snapchat's demographic is 18-24 yr olds but as you may know, new users over 35 is growing at 2X. Personally, I am under the impression that this means Snapchat is losing it's appeal with their current demographic. A. 1% of their 150M userbase that's 1.5M * $130 = $195M USD
B. 2.5% of their 150M userbase that's 3.75M * $89 = $334M USD
C. 3% of their 150M userbase that's 4.5M * $50 = $225M USD $1B seems a bit off from your calculations. We haven't even factored in COGS, manufacturing costs, etc. Not to mention their margins will be extremely low until they square away manufacturing which could take several years.
> Diversify their future product line... I highly doubt it is going to happen. > Forget a remonetization strategy for ads... I agree! I didn't say it was the best idea, but snapchat will need to go all in or not. They can't put a toe in and decide the market isn't ready or they need to raise more capital - it will send the wrong message to investors. Again, I am operating under the assumption that Snapchat is trying to become a brand. |
The only thing to realize is they have a $100+ device that is compelling to their 150M user base. That's a great sign. I think that the manufacturing chain for 'cheap shit electronics toys' is developed enough in 2016 to make good margins.