Wealthiest Angelenos: Snap Soars, Driving Huge Returns

Wealthiest Angelenos: Snap Soars, Driving Huge Returns
Snap co-founders Bobby Murphy (left) and Evan Spiegel (center) have seen the company’s stock surge this year.

For those Wealthiest Angelenos whose fortunes are tied to technology, the pandemic brought big gains in net worth over the past year.

In the face of the pandemic, consumers increased their reliance on tech platforms for social connections, ecommerce and any number of other functions.

While many businesses benefited from these shifting patterns in consumer behavior, no tech company in L.A. could match Snap Inc.’s year of explosive growth.

Founded by Wealthiest Angelenos members Evan Spiegel and Bobby Murphy in 2011, the social media giant enjoyed a sharp rise in users and revenue over the past year, and the company’s stock price skyrocketed as a result.

Snap’s stock price, which had struggled to find its footing following a strong initial public offering in 2017, was hovering at around $26 a share in July 2020. A year later, it had jumped to roughly $75 a share.

That sharp increase added billions of dollars to the already impressive fortunes of Spiegel, the company’s chief executive, and Murphy, Snap’s chief technology officer.

Murphy owns around 6.4% of Snap, more than 83 million shares, while Spiegel owns roughly 3%, or 42.1 million shares. Those extensive positions, plus several sales of millions of shares by the duo, translated into a net worth jump of around $4 billion for Murphy and around $2.7 billion for Spiegel over the past 12 months..

Snap’s growth over the past year reflects changes by the company that have been embraced by its user base, as well as advertisers and investors, according to Ygal Arounian, an equity research analyst for downtown-based investment firm Wedbush Securities Inc.

“In the early days, Snap made some changes that weren’t well received,” Arounian said. “But over the past couple of years, it’s made a lot of changes that were very well received. And that’s led to strong user growth.”

The gains of the past year are a stark contrast to previous years when the company’s revenue stalled, and user growth plateaued, in part because of subpar quality on its Android app and a 2018 redesign that drew the ire of longtime users.

That same year, Snap’s share price hit a low of $5.

The company’s recovery was highlighted by its second-quarter earnings results, which featured $982 billion in revenue, up a whopping 116% from the same quarter the year before.
During that period, Snap increased its user base to 293 million, good for a 23% year-over-year gain.

“Our second-quarter results reflect the broad base strength of our business and the hard work of our team as we execute to serve our community and partners,” Spiegel told analysts.

Arounian said that a significant amount of the company’s growth is due to Snap’s investment in its advertising offerings, such as rolling out public profiles, integrating Salesforce.com Inc. for businesses on its platform and expanding augmented reality options for advertising and ecommerce.

Though advertising spending stalled in the early months of the pandemic for many industries, digital advertising spending picked up in mid-2020, growing 12% year over year in 2020.

Snap has benefited from this growth, according to Arounian.
“Improvements in its ad platform and ad products have brought (Snap) a lot of advertisers,” Arounian said. “There’s been really strong advertiser growth, and it’s been able to charge more for ads.”

Snap has also invested heavily in its tech. The company launched its AR Lens Studio in October and acquired a location data company and a digital map-making company this year to bolster its mapping feature, Snap Maps. The company has also improved its AR-based ecommerce features in the past year.

Snap rolled out its Spotlight feature in November, which has paid creators $130 million to date as the company looks to compete with rival video sharing platform TikTok.

“The core of it is that it’s really improved its platform,” Arounian said.

He added that Snap’s investments will pay off in the long run by strengthening the company’s Gen Z user base and penetrating international markets.

“It’s still not as big as it can be internationally,” Arounian said. “Its international expansion is in a much earlier stage. So that’s a factor that could help support its story over time.”

Keep reading the 2021 Wealthiest Angelenos special edition.

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