Snapchat is one of the few social media apps that stand in the way of Facebook dominating the market. This isn’t to say that they stand a chance against Facebook; it shows that they have their own dedicated user base who chose it after Facebook. There have been many doubts about this App, and some people have gone as far as to say it will fail soon. Well, there is some truth in this because at this rate, we may not have an independent Snapchat in the coming years. Read through this article and see some of the main reasons why many people assume the Snap IPO will fail long-term.
Well, to start this off, let’s talk about it business-wise; they Haven’t Made Money. As a matter of fact, the app lost up to $514 million in 2016. This loss was greater than their $372 net loss in the previous year. While losses aren’t necessarily fatal, net losses are okay if you still manage to grow revenues like Amazon and Tesla. However, if you expect to keep up slowing revenue growth, you can’t keep up net losses for long. Another thing that will affect Snapchat is its small UserBase and the alarming decline of Daily Active Users. Twitter, one of the other non-Facebook social media platforms, struggles to survive even with its 300+ million users and diverse user groups. Snapchat, in 2018, had lost about 48% of its user base from the previous year. Snapchat, like most social media apps, was created to appeal to and be used by Millenials. However, this age group is extremely diverse, which is another issue for the company.
98% of Snapchat’s revenue stems from advertising, putting them at an average of $1 revenue per user. This isn’t good for a social media app. Even Google and Facebook, who are the ad kings, have other sources of revenue other than just ads. Google owns an entire mobile OS, and Facebook is taking over the messaging scene with WhatsApp. This proves that Snap isn’t trying its hands in other markets and isn’t innovative enough within their app. They had the concept of Snapchat glasses, and it even seemed like a fun idea. However, it had a major roadblock as people still tend to freak out at the idea that you’re recording them in public.
Snapchat also has a problem with its competition, and if it doesn’t do something drastic, it’ll be left in the wind. Within a few years of Snapchat’s release, Instagram has quickly and skillfully copied most of Snapchat’s unique features and is constantly expanding and improving on them. Combined with Instagram’s discoverability and exploring(it’s super easy to find friends and interesting people to follow on Instagram), they have left Snapchat in the dust a while back. Snap needs to learn how to implement features like this into their app or end up like Periscope. The Periscope app was entertaining in that you could broadcast live videos and discover people’s feeds easily. The app started its journey to the rocks when prioritizing celebrities and news over the common person. Over time, it became just another app, losing its interesting aspects and becoming a walled garden. Snapchat is rapidly heading down this path.
Snapchat will never be up to Facebook, and that’s a fact. Facebook is so much more than just its app at this point, and You’re using it to log into a variety of sites, services, and apps. I, for one, wouldn’t be able to get into 70% of the apps on my phone without my Facebook login. Also, ad-wise, Facebook takes the ball because they have tons of data on other people, making it a goldmine for the advertisers. Snapchat doesn’t have this or even anything to match. Their large millennial audience isn’t really enough to make a difference.
Aside from all these, Snapchat is also on a decline because they basically kicked out their user base. Even after losing 48% of their users in 2016, they made a huge blunder and lost even more after the big January 2018 redesign.
On the old Snapchat design, On the left, you had Messages in reverse chronological order. The right side contained Stories from everyone in reverse chronological order with a carousel of ranked preview tiles in a carousel above or below Stories. The Auto-advance feature was there, and it really was Automatic and instant.
The January 2018 redesign added some useful features, the more obvious navigation buttons to ease new and old users. They also managed to make the Stories list algorithmically sorted so you’d see your best friends first rather than just who posts most often. However, they were overshadowed by the other immensely disagreeable changes. They removed content creators from the Stories list, turning the inbox into chaos with ad-laden Stories and breaking auto-advance, so you have to watch an annoying interstitial between each friend. The new design was like this:
Messages and Stories from friends mixed sorted algorithmically on the left. On the right, Discover, sorted algorithmically, with influencers and people who don’t follow you back mixed in. And the auto-advance feature was broken by the dang interstitial preview screens.
And to top it all of, their executives were really not seeing the problem. EvanbSpiegel bluntly disregarded the poor feedback of the redesign and went on to say, “Even the complaints we’re seeing reinforce the philosophy. Even the frustrations we see really validate those changes. It’ll take time for people to adjust.” As you can imagine, the user base didn’t take kindly to this response, and Snapchat’s growth fell to its lowest rate ever.