Morning Report: Snap’s Earnings Week Is Upon Us

Morning Report: Snap reports earnings this Wednesday. 

The firms that matter during earnings season changes based on which companies currently drive the narrative for their respective industries. Snap, it seems fair to say, is playing for the Unicorns.

How Snap fares later this week, then, will impact how other companies are valued. If Snap falters, other social-focused firms that are betting on growing digital ad incomes could see their valuations dinged. And if Snap, the largest tech IPO of the year, stumbles, its troubles could slow the current public offering cycle.

This first earnings report from Snap, the rapidly-growing, dramatically-unprofitable, maybe-next-Facebook-social-camera-thing, will reveal a lot about the company. More, you might feel, than most first earnings reports manage.

That’s to say that when fellow recent-IPO Mulesoft reported earnings last week, it wasn’t very dramatic. The company beat expectations, and its shares rose. For Snap, the market has more questions than EPS. Here are just a few:

1. How much impact has Facebook’s feature-borrowing fusillade had, to date, on its DAU growth?
2. Can the company’s hardware business show signs of life as a material revenue source?
3. Does the company stem losses while still posting aggressive revenue growth?

There are more questions to be answered in this Snap earnings report than Mulesoft’s because Snap isn’t the most mature of companies to go public. The company has little recorded revenue history, but the results it has put down into the ledger book have been terrific when viewed from a revenue-growth perspective. So as much as things have changed—accreted, really, in the revenue sense—for the company over various three month periods before, this first calendar quarter may include some interesting results for the company.

To underscore that point, TechCrunch’s Matthew Lynley wrote recently about the impending Snap report that is worth sharing:

Earlier this week, Snap launched its self-serve ad manager, which will open up advertising opportunities to a broader audience. But it’s not clear if the audience and product lines up to be a mismatch with small- to medium-sized businesses that can spend their smaller budgets on advertising campaigns that have been around and can deliver a more reliable outcome. Snap ad campaigns may show an enormous amount of engagement, but with only around two years of advertising history, the exact pathway from that ad to a return on investment may not be as hammered out and easy to pitch as it would be for Facebook and Google.

We’ll know more on Wednesday.

From the Crunchbase Daily:

Kobalt, Smule raise big rounds for music tech

• Investors like what they hear when it comes to music tech, with two new big rounds for the space. Kobalt, which operates a platform for collecting music royalties, raised $75 million in a funding round that values the company at $775 million, TechCrunch reports. Meanwhile Smule, the social media music app developer, has raised $54 million in a new funding round led by Tencent at a $604 million valuation, according to a Reuters report.

Garena raises $550M, rebrands as Sea

• Singapore-based Garena, the fast-growing e-commerce and online games company, has rebranded as Sea and raised $550 million in new funding. The company is also reportedly preparing for a U.S. IPO.

Ed-tech gets a boost

• After several years of sharp increases, funding for U.S. education and ed-tech companies slowed last year amid a broader retrenchment in the VC space. Lately, however, ed-tech is generating renewed traction with some large rounds and closely watched early stage deals, according to a Crunchbase News analysis.