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Snapchat's parent needs to think bigger, says ex-Facebooker-turned-venture capitalist

Chamath Palihapitiya, founder and CEO of venture firm Social Capital, is questioning why Snap is focusing its strategy so narrowly.

In an interview Thursday on CNBC's "Squawk Box," Palihapitiya said a social network can expand in three ways: number of users, engagement and advertising. He should know, since he was an original member of Facebook's management team.

"The ad load is limited … [so] you have to be growing users and engagement violently to make maximum profit and maximum value," he said.

He said Snapchat's parent has said it's going to "focus on that second pillar [saying] 'we don't think this is a user growth play. We think it's a user engagement play.'"

Palihapitiya, co-owner of the NBA's Golden State Warriors, wondered why snap doesn't aim for both. "My perspective, coming from a place [Facebook] that decided both were important, … every user in the world should use our product because it's that good. I would want to own a company that wants every single person in the world to be using it."

On Snap stock, Palihapitiya facetiously said, "I would love to be long the stock at '3 cents.'" He said he was speaking directionally, adding his small recently launched internal hedge fund might "take a hard look" at Snap at $15 per share. But at the current price of about $21 per share, he insisted, "I'm not a buyer."

Earlier this month, Snap priced its initial public offering at $17 per share and closed its first day of trading up 44 percent to close at $24.48 per share. While getting off to a good start, the stock has hit some rough patches, falling to around $21 per share.

A number of sell ratings from analysts surely have not helped. And on Thursday, another research group, MoffettNathanson, initiated coverage with a sell and a price target of $15 per share — below the offer price.

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