Snap said to leverage discounts to drive growth

After a painful first-quarter miss, Snap, the parent company of the popular social app Snapchat, is looking to avoid the same fate in the second.

According to Digiday, Snap is working to drive new and increased business ahead of the end of its second quarter. To do so, the company is said to be cutting deals. In the words of the report, Snap is “looking to goose its ad business with offers of discounts and incentives to ad buyers.”

At least some of the discounts have an end date, it appears. The same report, citing “multiple agency executives,” notes that Snap’s proffered “bonuses, discount coupons and media credits for ad buys” are tied to the close of the second quarter. If the incentives work as likely intended, Snap could book new top line inside the current quarter that might help it meet or best market expectations.

Of course, incentives are not new, and potentially using discounts to drive growth is not something inherently bad. Snap declined to comment on the purported deals.

After its first-quarter miss, Snap’s share fell steeply, erasing much of the company’s post-IPO gains. Snap, which went public at $17 per share, traded as high as $29.44. It’s worth $21.30 today. Therefore, it is not surprising that Snap wants to avoid another embarrassing earnings miss. And to see the company allegedly turn to discounts with expiration windows is not an utter shock.

There is a bit more to the story, however, that we should understand by viewing Snap’s first quarter’s results inside of proper historical context.

Snap’s first quarter

Grounding Snap’s discounting push are its first-quarter results: The company grew rapidly, lost billions and missed expectations on both ends of its line. Snap reported first quarter revenue of $149.65 million. The street had anticipated a $157.98 million tally.

The company was expected to be deeply unprofitable in the quarter, due in part to one-time share-based compensation expenses. Even so, Snap bested the market’s expectation of a $1.92 per share loss with a steeper $2.31 per-share deficit.

And finally, Snap’s growth in daily active users, or DAUs, fell 2 million under the expected tally of 168 million.

That is broad context for why Snap may be pushing hard to ensure that it doesn’t miss again in the second quarter. A similar setback to its share price will put it either at or below its IPO price, a dramatic repudiation of the young company.

Second quarter dreamin’

As such, Snap must not miss when it reports its second-quarter results. But there is something lurking beneath the firm’s first-quarter miss that is interesting for us to consider: seasonality. Or perhaps more clearly: too much seasonality, and too soon.

In its S-1, Snap noted that it seasonality impact its business. That fact surprised no one. Ad-based businesses often see more sales during the fourth quarter when holiday buying cycles push consumer spend up….