Snap (NYSE:SNAP) has only been selling its Spectacles for a couple of full quarters now. The sunglasses with embedded cameras were first released in November 2016 to much fanfare, following a largely successful marketing campaign that built up hype around the product thanks in part to perceived scarcity. Spectacles were initially only available through the company's own bright yellow vending machines, but Snap has since started selling Spectacles online, including on Amazon.com.

Spectacles revenue fell in the second quarter, though, to $5.4 million.

Woman wearing Spectacles with a red background

Image source: Spectacles.

Spectacles revenue fell 35% sequentially

I've already made the case that Spectacles are totally not worth it for Snap: The company loses money on them and they barely contribute to user engagement. Spectacles were not widely available in Q4 2016, so the performance over the last two quarters should capture the vast majority of this business.

Spectacles

Q1 2017

Q2 2017

Revenue

$8.3 million

$5.4 million

Implied units*

Approximately 64,300

Approximately 41,900

Other cost of revenue (non-GAAP)

$20 million

$18 million

Data source: Snap conference calls and earnings presentations. *Based on $129 retail price.

Snap breaks down non-GAAP cost of revenue into three main categories, the biggest of which is hosting costs, after excluding stock-based compensation expenses and depreciation and amortization expenses:

Chart showing a breakdown of cost of revenue over the past five quarters

Image source: Snap earnings presentation.

That other category is primarily related to Spectacles. Per Snap's SEC filings: "In addition, cost of revenue includes inventory costs for Spectacles and facilities and other supporting overhead costs, including depreciation and amortization." Remember, depreciation and amortization are already excluded in the chart above.

On the last call, Snap CEO Evan Spiegel said that Spectacles had created 5 million Snaps to date, which was utterly meaningless at the time compared to the 270 billion Snaps that were created in the first quarter. The company did not mention how many more Snaps had been created via Spectacles in the second quarter, but it's impossible that the engagement is meaningful.

A numbers game

Snap's Q1 figures suggest that Spectacles owners create approximately 80 Snaps in a quarter with the device, based on 5 million Snaps and around 64,300 units sold. If the installed base has grown to approximately 106,200 and that level of usage remains constant, Spectacles would have created perhaps 8.3 million Snaps during the second quarter.

On the call, Spiegel said that each DAU now "creates over 20 snaps per day, on average." With 173 million DAUs now, that translates into nearly 3.5 billion Snaps created per day (up from 3 billion Snaps per day in Q1), or around 311.4 billion Snaps created throughout the second quarter. Putting all of these estimates together, Spectacles would have contributed maybe 0.003% of all Snaps created during the second quarter. That's up from my 0.002% estimate from the first quarter, but still a literal rounding error.

Still not worth it.

Evan Niu, CFA has the following options: long January 2019 $20 puts on Snap Inc. The Motley Fool owns shares of and recommends AMZN. The Motley Fool has a disclosure policy.