Snap Inc (NYSE:SNAP) was already facing pressure and competition from Facebook and now it has been revealed that Google is also working on a similar technology that will rival Snap’s main features. Snap has already been under fire that it exaggerated some of its claims and its user growth is not taking off as expected, adding another big competitor to the mix will not help matters.
In the technology world if you don’t find ways to continuously innovate you can easily be copied and competitors can come out with better versions of your products and services. In the case of Google and Facebook, the companies have more resources and capabilities than Snap and already have a significant amount of users.
The danger of investing in a company with no discernible moat is it is vulnerable to competition. Reports claim that Google tried to acquire Snap last year and given the concerns the company inflated some numbers, Google may have dodged a bullet.
If Snap’s features can be integrated into Google or Facebook’s existing services then it could eliminate any advantage Snap has since it would be easier for users to do everything they needed on one platform.
Snap is expected to release its earnings this week and if the company fails to show any progress towards meeting its growth targets the stock may plummet further. After initially seeing hype carry the IPO up to over $27 in its first few days of trading the stock is trading at less than half that amount now. This is a stock I would stay far away from.
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