Snap’s Misfire on Spectacles

Snap badly overestimated demand for its Spectacles and now has hundreds of thousands of unsold units sitting in warehouses, either fully assembled or in parts, according to two people close to the company. The disclosure undercuts Snap CEO Evan Spiegel’s recent contention that Spectacles sales of more than 150,000 had topped the company’s expectations.

The news is another setback for a company that is already struggling to meet expectations for advertising growth, and whose stock is still trading well below its IPO price. While a small part of its business, hardware has been seen by some close to the company as offering the best hope for long-term growth.

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A big question now is how long Snap Labs can remain at its current size and ambition. As Snap starts to review its costs broadly, executives may question the value in having a sizable unit of well-compensated engineers working on non-essential projects. The pressure, then, will be for the group to roll out a product in the next few years that, unlike disappearing messages, can actually stick around.

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Snap Labs currently works out of a Venice building that cost the company tens of millions of dollars to outfit