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Snap Inc. reported today that it saw $207 million in Q3 2017 revenue and that the company lost nearly $40 million, primarily due to excess Spectacles inventory. Last month, Snap said 150,000 pairs of Spectacles had been sold, an amount CEO Evan Spiegel described as exceeding his expectations. He struck a different tone in today’s earnings call.
“We were very excited about Spectacles and by the initial reception, and because we were so excited I guess we made the wrong decision … We were balancing the trade-off with unit economics, of course, that come with hardware, but ultimately we made the wrong decision based on the early traction and ordered a lot of long-lead time parts, and ultimately weren’t able to sell as many Spectacles as we thought we’d be able to based on the early adoption,” Spiegel tried to explain.
Spectacles, a pair of glasses that contain a microphone and a wide-angle camera, made their debut last fall and represent Snap’s first venture into hardware, part of what Snap used to sell itself as a camera company. The devices were first available at vending machines in cities like San Francisco and New York until they were arrived online for $130 in February.
The camera glasses were mentioned 45 times in S-1 filings this spring. The filings stated that Snap wanted to “significantly broaden the distribution of Spectacles” in 2017.
“We have limited manufacturing experience for our only physical product, Spectacles, and we do not have any internal manufacturing capabilities,” Snap stated in its S-1 filing earlier this year. “Instead, we rely on one contract manufacturer to build Spectacles … Any errors or defects in that third-party technology could result in errors in our products that could seriously harm our business.”
As VentureBeat reported in early 2017, Spectacle adoption, even in places like San Francisco or Snap’s native Los Angeles, seemed pretty sluggish. Poor Spectacle performance has been part of previous tumbles in Snap stock following quarterly earnings reports in May and August.
Also reported during Snap’s third quarter earnings: User growth fell below analyst expectations, and Snap announced plans for a major app redesign.
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