Snapchat: competition for the blue king? Or just a little yellow bird?
On March 2, Snap went public. The startup is now worth about $30 billion. In 2016, Snap posted a loss of $500 million. Is it justified that the yellow ghost is worth just as much as Credit Suisse? Will Snapchat become a second Facebook, or will it turn out to be more like a second Twitter?
As a 23-year-old, could you have turned down a 3 billion dollar purchase offer from Facebook for your start-up? Evan Spiegel, founder of Snapchat, had "big balls" in 2013 and turned Mark Zuckerberg down. This "no" shows a great deal of self-confidence. Evan Spiegel - the son of two successful lawyers - comes from a wealthy background. Someone like that naturally knows that he will fall soft if his project fails. But does he even need a soft backup landing?
Real life on Snapchat
Snapchat is focusing on the following three growth areas: Mobile, video and creative advertising products. Over 150 million users currently use Snapchat every day. The majority of these are young people between the ages of 13 and 34. This target group is extremely exciting, as it is becoming increasingly difficult to reach via traditional media channels such as linear TV. However, Snapchat's biggest USP is its different nature. Snapchat is authentic, raw, ephemeral and stands for real life. All content disappears after 24 hours. This is in contrast to other social media portals such as Instagram. A photo on this photo platform is a staged image. The image, optimized with various filters, is destined for eternity. Instagram versus Snapchat is like Hollywood versus "real life".
1st growth target: More users
The current stock market value takes into account enormous growth ambitions. Firstly, user numbers must continue to rise. In the 4th quarter of 2016, an average of 158 million users used Snapchat every day. However, user growth flattened out in 2016. With 68 million daily users, a large proportion come from North America. In Europe, 52 million people snap every day, compared to 39 million in the rest of the world.
2nd growth target: Improving the monetization of users
Secondly, users need to be monetized much better in the future. In 2016, an average user generated less than 3 dollars. Facebook generated 16 dollars in the same period. Facebook's revenue per user is almost 500 percent better than Snapchat's. Snapchat must succeed in significantly improving monetization with creative advertising products - such as sponsored lenses or sponsored geo-filters. In particular, hardly any advertising revenue is currently being generated with users from Europe and the rest of the world.
3rd growth target: Expansion of the Snap ecosystem
Thirdly, Snapchat must try to expand its Snap ecosystem. A first step into the offline world has already been taken with the launch of "Spectacles" in fall 2016. These Snap sunglasses with a built-in camera can be used to create ten-second snaps. The acquisition of the search app Vurb is also exciting. Who knows, it may soon be possible to make restaurant reservations and order cabs in the Snap app. By expanding the Snap ecosystem, Snapchat could become the Wechat of the Western world. However, there is still a long way to go.
Only if it succeeds in achieving these three ambitious goals will the yellow ghost have a chance of knocking the blue king off his throne. If this does not succeed, the yellow ghost will probably become a blue bird.
Sven Ruoss is Head of Studies CAS Social Media Management at the HWZ University of Applied Sciences in Business Administration Zurich and a columnist for Werbewoche. This article was previously published in Werbewoche 6/2017 on March 24, 2017.
