Is Snapchat’s bubble about to burst?
Despite all the buzz around it and a heady IPO, some industry observers are asking if Snapchat's glory days are over. Columnist Laura Collins looks at what the future has in store for the social media network.
Unless you’ve been living in a cave for the last six years, you’ll be well aware of Snapchat’s meteoric growth. Founded in 2011 by three students at Stanford University, in less than a decade it’s reached 161 million daily active users (DAUs) and become part of popular culture — a part that many young people couldn’t bear to live without.
But how long can Snapchat’s star continue to rise? Recent data suggests, not for long. So here we take a closer look at its recent history and think about how it’s likely to fare now that it’s playing with the big dogs.
The growth of Snapchat
Snapchat (originally named Picaboo) was first founded as a selfie app allowing people to share short-lived, self-deleting photos — the idea being that photos with a limited shelf life would encourage carefree creativity and more natural interactions between users.
Despite the snag of screenshotting, that idea certainly struck a chord with the selfie generation: by the end 2014, Snapchat had gained 71 million DAUs. In that time, it evolved to include video, Stories and Chat, allowing people to connect in a variety of different ways, but maintaining the ephemeral hallmark.
With all those users came an inevitable need to monetize, and by 2015, Snapchat had developed Snap Ads, Sponsored Geofilters and Lenses.
The next two years saw continual development of Snapchat itself and its ads product, and in June 2016, its DAUs surpassed Twitter.
On March 2 of this year, Snap Inc. (Snapchat’s parent company) went public on the New York Stock Exchange. By the end of the day, stocks were up 44 percent, and the company was valued at $34 billion. Not bad at all.
But what goes up must come down, right?
After an undeniably strong start, things took a bit of a turn for the worse. Three days after its IPO, the stock dropped by 12 percent; the stock market may have seen worse, but it was unsettling nonetheless. This decline was fueled by investor concerns about growth rates. In Q4 2016, Snapchat’s user base had increased by 5 million, compared with 21 million in Q2. And the cause of the decline is no secret.
Snap Inc. themselves admitted in their filing they’d faced “increased competition both domestically and internationally.” It doesn’t take too much reading between the lines to know they mean Instagram Stories. Few in the industry (including Instagram’s CEO) could deny they were a shameless rip-off of Snapchat Stories, but that didn’t stop their release in early Q3 from making an enormous dent in Snapchat’s growth — 82 percent, to be exact.
The knife has recently been twisted even further with the release of Instagram Stories ads. If history teaches us anything, this could lead to Instagram not only stealing a chunk of Snapchat’s users, but also its ad revenue.
And the competition doesn’t end there. Facebook has now released Messenger Day and Facebook Stories. So in case you felt that sharing the story of your day on Instagram and Messenger just wasn’t enough for you, worry not! You now have three options to keep you satisfied. And Facebook has two new opportunities to monetize, potentially stealing an even bigger slice of the pie from Snap.
So, is this the end for Snapchat?
In my opinion, no. Growth has to slow down at some point. Facebook’s certainly did. If exponential growth continued indefinitely, you’d eventually reach everyone on Earth with access to the internet, which I suppose would be mission accomplished. My point being that infinite growth is not possible for social networks, and competition is high. A slowdown doesn’t mean death — it’s just reality.
Snapchat still has a lot going for it. Its user base is highly active and incredibly loyal, and its core message persists even as competitors continue to pop up.
While a generation of tweens has been groomed by other platforms to maintain and project a constant image of preened perfection (hello, Instagram filters), with Snapchat that doesn’t matter. Users are encouraged to share something closer to their “real” selves because it’ll soon disappear. While Instagram Stories may be the same in principle, its long-established reputation as the place where everyone goes to look beautiful means it’s unlikely users will ever use the feature in quite the same way.
Like any social network, people have some gripes with Snapchat. Some users find the interface difficult to use, and advertisers complain of a lack of transparency and heavy investment required to produce vertical content (an absolute must for the platform). Addressing these gripes is what will allow for continued growth and help it retain its high-ranking position on the social podium.
While it hasn’t gone as far as creating a pixel yet, there is an option for advertisers looking to get more visibility on exactly how their Snap Ads are performing. The Web View attachment for Snap Ads is a preloaded web experience within Snapchat that uses a mobile URL. So as long as you’ve got that URL tagged up correctly with UTM parameters or click-trackers, you can see if those ads are leading to conversions. Of course, that’s just one of many ad types, but it’s a step in the right direction, at least.
That kind of transparency, and expansion into different ad types, will help Snapchat appeal to clients with smaller budgets, as well as the giants. At Merkle|Periscopix, my employer, we’re big believers that paid social can work for any advertiser, big or small, and Snapchat should be no exception.
Now that Snap Ads are available programmatically with no minimum spend requirements through select marketing partners like 4C, a presence on the platform is becoming a reality for more and more advertisers. But this trend needs to continue. After all, it doesn’t pay to forget about the little guys; several small budgets still add up to a lot of spend.
With success comes more scrutiny and criticism, but hopefully in Snapchat’s case, it won’t lead to complacency. If it can continue to spearhead the kind of innovation and creativity we’ve seen from it over the last few years, I have no doubt it’ll continue to grow… just a little more slowly.
Opinions expressed in this article are those of the guest author and not necessarily MarTech. Staff authors are listed here.