A combination of SNAP and GOOGL would provide important synergies. Despite Snap’s issues, the company still has a highly engaged user base with average time spent at about 30 minutes per day. The app also targets the much sought-after younger demographics of Gen Z and the Millennials. Snap also has a head start on short-form video content through its Discover feature.
Alphabet can clearly bring a lot of value to the table, too. The company can provide distribution through properties like Gmail, Search, Maps and YouTube. But GOOGL also can help with the Android versions and allow for quick penetration into foreign markets. Perhaps the biggest advantage is the proven advertising infrastructure, which can speed up the monetization efforts.
Bottom Line on SNAP Stock
Any potential buyout of Snap at this point would (and perhaps should) draw skepticism, but I think a deal between Alphabet and Snap would end up being a good fit.
However, predicting M&A is a dicey venture. There are countless examples of where a deal should have been done, but management was either too short-sighted to see the play or too stubborn to make it.
Things are even more risky considering SNAP stock has no voting rights, which means an activist can’t agitate for change. The voting power is in the hands of the company’s co-founders, and so far, they’ve been resistant to acquisition advances.
But given the continued challenges and the seemingly constant decline in shares, management should get a jolt of reality soon. Action must be quick, though. When it comes to digital properties, things can come undone very quickly.
Tom Taulli runs the InvestorPlace blog IPO Playbook and operates PathwayTax.com, which provides year-round tax services. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.