Still Not Sold On Snapchat

Full disclosure: I am a millennial non-Snapchat user, so please forgive any improper Snapchat related terminology in this post.

There’s been a lot of press the past few weeks on Snapchat’s upcoming IPO and it’s been very interesting for me to read analysis on the company’s filing documents.  They show a tiny glimpse of the inner workings of a relatively secretive company that is asking for a whole lot of money.  The company is certainly doing it it’s own way: the filing documents have a very casual and direct tone to them, but most significantly, Snapchat will issue entirely non-voting shares, a first for a US IPO.  I personally think this is favorable for the company as it will allow Evan Spiegel, co-founder and CEO of Snapchat, the ability to develop his long term vision of the company rather than be required to appease short-term investors.

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The company has gotten some great PR by doing something that even Google couldn’t even succeed in: making wearable cameras cool.  With their rollout of the Snapchat Spectacles and the whole “game” of tracking down a vending machine that offers, they had people everyone scrambling just to get their hands on one.

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Reading articles on analysts’ take on Snapchat’s strategy (https://www.wsj.com/articles/snaps-ipo-filing-offers-peek-into-its-advertising-strategy-1486078983) paints a picture of a company that is creating a different path than the social media titans Twitter, Instagram, and Facebook.  Rather than focusing on rapidly growing the number of users, Snapchat is emphazing its ability to maintain high levels of “customer engagement”, something it claims its competitors can’t offer.  From what I’ve read, it looks like Snapchat has had successes in the way it incorporates ads such as the Taco Bell face changing ad.

Despite all their successes with the 18-30 demographic, I still have to ask the question: will Snapchat be able to maintain engagement from me and my peers for the forseeable future?   I ask because “customer engagement” is a bit of a fickle thing.  Last week I read a few posts from my peers about how they’ve transitioned from AIM to Myspace to Facebook and then to Instagram/Snapchat/Twitter in the course of 5-10 years.

It already appears that Instagram is able to steal a bit of Snapchat’s thunder as its “Stories” function has received rave reviews for its design and simplicity (as well as significant comparisons to Snapchat, something Snapchat alluded to in its IPO filings as a potential threat).  Obviously, credit always goes to the original creator, but the question still remains, how can Snapchat maintain customer engagement in a form of communication that is mainly used by 18-30 year olds?  How can it avoid becoming the next Myspace?  Something that is widely popular for a long time but then suddenly eclipsed by the next big thing.

I’ll admit that I’m probably not the best person to answer that question as I have so far avoided Snapchat.  I’ve tried it a few times but didn’t like its interface and quite frankly I’m just not creative enough to come up with witty posts on a regular basis.  I like the notion that there’s no “Likes” or “Comments” features built in, because it frees me from feeling like my posts are out there for public approval.  But at the end of the day, it’s just a different format than what I’m used to and comfortable with.  I enjoy my Twitter/Instagram/FB feed because I recognize that not everyone will see my post because of the algorithm the different platforms use.  I could be mistaken on how the medium actually works, but I’m not comfortable with my posts showing up as a “bubble” on all of my Snapchat followers to see.

I have been getting a taste of the Snapchat experience from Instagram now that Instagram Stories has proliferated but I haven’t actually used it myself because I don’t see a scenario where “my” story would be worth sharing.  I like posting my pictures/videos “as is” on a regular platform and don’t see the appeal with the Snapchat format.

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I’m skeptical as Wall Street is widely optimistic about this IPO.  Numerous articles point to a majority of analysts being very eager to get their hands on these shares.  Personally, I see the optimism as investors excited about a big name IPO during a dearth of high profile private companies going public.  A few of them have even admitted they don’t want to make the mistake of missing out on the next Facebook if Snapchat ends up having similar returns for the next few years.  It will be interesting to see how the IPO plays out as Snapchat still has a ways to go to become profitable, but if it can somehow match even half of the profit that Facebook has shown over the past few years, it just might lay out a foundation that will allow to maintain its innovation and uniqueness.  I might not be a believer, but I can certainly appreciate the creativity involved in the average Snapchat posts.

 

 

10 comments

  1. Thanks for sharing this blog! Your title really got me reading into this, since I’m not a Snapchat user either. I have tried the app a few times to see what everyone was talking about, but it’s been a while since I’ve used it or even opened it. All of the mysteriousness around Snapchat’s CEO and his actions, including declining an offer from Facebook a few years ago for $3B, made many people skeptical about what’s installed for Snapchat in the future. As you mentioned, I wonder too what’s installed onwards for Snapchat, and whether they will become nearly as profitable as Facebook, which is a big mystery.

  2. Nice post! I think it’s interesting how Snapchat the app is rebranding itself into Snap the camera company for their IPO. Like you said, they’re going to want to have some staying power, and I think that while it is a bit of a riskier decision, their new status as a camera company will allow them to grow and expand in a more organic fashion. Would love to get a pair of Spectacles for myself, and I’m excited to see what Snap/Snapchat does next!

  3. Really interesting article to read as an avid Snapchat user. I think the attraction to Snapchat is the idea that you can share a bit of your personality and your life with people, although it may not be entirely genuine to your real personality. I think a lot of people recognized the danger with this with their blog posts last week, and realized that not everything had to be shared through a platform like Snapchat. Personally, I think the IPO is premature and Snapchat has a lot more growth to do. I didn’t realize that they only plan to issue non-voting shares though, which makes a bit more sense as to why they want to issue their IPO now.

  4. The question with Snapchat has always been whether they can monetize that engagement. I’m also not a huge snapchat user, but I haven’t yet seen a compelling argument that they can. Many of the top IPO’s though (i.e. Google, Facebook) hadn’t figured it out at that point yet, either. We’ll see.

  5. It is hard to see how all these social media platforms can continue to compete profitability. There are after all limited amounts of eyeballs and hours in the day. I find Snap Chat very niche but with public sentiment being fed up with Social Media’s negativity maybe the inability to comment will be a competitive advantage.

  6. I’ll be the first to admit that I’m not very familiar with Snapchat (haven’t tried it, but am vaguely aware as to what it can it do), but I’m curious as to what is going to come of the IPO. While Facebook wasn’t profitable when it had its IPO, it was fairly mature and there was certainly a vision. I’m curious as to whether they can figure out ways to keep customer engagement of the 18-30 demographic high enough to ultimately draw advertising dollars (which is how I assume they’ll make money) away from other companies.

  7. Great post! I’m actually doing my presentation on Snapchat’s evolution and their strengths and weaknesses as their IPO approaches, so reading your post was a great take on it. I completely agree that the non-voting shares are a good move for future growth. It always bothers me when companies have to sacrifice a slow-moving yet solid long term strategy for growth in exchange for pleasing the short-term demands of the shareholders. While shareholders might dislike not having a say, I think the non-voting aspect will allow Snap Inc to grow as intended.

  8. Great post on such a relevant topic! For the longest time, I feel like Snapchat has been extra mysterious in how they have run the business. Their IPO should answer many questions and I am curious if they will become as profitable as Facebook. The company continues to push out new filters and other features within the app, but I question their ability to make their product successful in the long-term

  9. Awesome post. One thing I always found interesting about Snapchat is how frequently it is used. I remember reading in their filings that 2.5 billion snaps are sent each and every day. That is truly an astounding number when there are less than 200 million daily active users. I also learned in a digital media class last semester that stores such as Wal-Mart and Target will begin to use your location based on Snapchat and Snap filters to offer coupons and discounts on products. I think the ability to monetize Snapchat is just getting starting and advertising stories on the App will not be the only way for the company to earn revenue going forward.

  10. One of the answers to your question of maintaining engagement in the long term, I believe, is the new “discover” content. Major media outlets including the Economist, Daily Mail, bleacher report, BuzzFeed, NYT, and more are now looking to Snapchat as a platform to publish creative, interactive content. It’s actually pretty good stuff- informative and engaging. It will be interesting to see how it develops down the road and the role it plays in driving revenue/profitability.

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