Key Takeaway
Snap Inc’s IPO was one of the most anticipated in the tech industry, launching well into unicorn territory. Since its premiere in March, however, the stock has been volatile at best. Stakeholders look to outside insight to determine what could save the brand, and where it went wrong.
We all recall Facebook’s failed $3 billion bid to purchase social media new kid on the block, Snapchat, back in 2013. Many were left slack-jawed in disbelief as the then-23-year-old CEO refused the offer, convinced he wouldn’t receive such a high valuation again.
The app known for its disappearing live videos and images and unique filters seemed to have proven critics wrong, however, when it announced an IPO to the tune of around a $24B valuation – well in unicorn territory. Since Snap Inc’s public premiere in March, however, things have been shaky at best. Now a new round of layoffs in the recruiting division, failed product launch and decline in hiring indicates an even more ominous future.
Were the critics right? Was Facebook’s offer a better bet? What were the insights Snap might have missed while looking in?
A look at Facebook’s £3B offer
According to Forbes, here are the insights Zuckerberg saw when looking out:
- Snapchat had a stronghold among young teens – a user base Facebook was rapidly losing relevance for. Snapchat at the time had around 26M US users, including 26% of adults between the ages of 18 and 29
- Facebook shares were on the decline: between the close of Nasdaq trading on Oct. 30 and opening on Oct. 31, shares dropped by about 3% – enough to have reduced their market value by $3B and made that offer worth their while
- Facebook was hitting saturation in terms of the number of ads it could place in users’ newsfeeds and therefore facing stagnating growth
- Live videostreaming and the disappearing act that boosted Snapchat to popularity were becoming increasingly relevant and offered the opportunity for a new form of ad revenue on social media
- Combining Snapchat’s popularity among teens and new technology with Facebook’s power and vast network seemed to promise the same success Zuckerberg saw with his early acquisition of Instagram
Rapid decline: a look at Snap’s value since its March IPO
Snapchat versus Facebook filters
Snapchat is facing rival Facebook, who has been able to easily clone its core technology. It even launched selfie filters, offering users yet another reason not to stray from the social media giant. Facebook launched Stories on Instagram in 2016. Today both Instagram Stories and WhatsApp Statuses have 300 million daily users – more than twice that of Snapchat as a whole.
What insights should Snap be looking at?
Testing is essential.
CEO Evan Spiegel is well known for taking his time introducing new product features, sticking to Snapchat’s core product – with the exception of their recently failed spectacles product which took $40M off their bottom line this year. Competitors like Facebook are constantly elevating the product, paying close attention to consumer behavior.
Content is still king.
Brands and influencers are looking for the network that gives them the most reach and engagement for their ad $$. Facebook and Twitter have launched Audience Network to extend the reach of advertisers’ campaigns. Without marketers on your side, there’s little chance for survival. According to Statista, only 7% of marketers have used Snapchat in 2017.
Supporting influencers.
Influencers drive the success of any social platform, and their experience with Snapchat has been less than smooth, with many turning toward Instagram Stories. “Snapchat should’ve went back to the drawing board and figured out a new way to compete, instead of being romantic to how [it] has been running for the last couple of years,” influencer Harris Markowitz told CNBC.
Partner with developers.
Facebook has established relationships with developers who are building products on top of its platform and contributing to its technological offering – including the recent addition of an AR developer platform. Moves like this help drive its own technology forward, while forging deep relationships with the developer community.