Is Snapchat on the Way Out or Just Finding its Footing?
Google twice offered Snapchat a $30 billion buyout, the industry learned last week: before its last fundraising round in 2016 and before its recent IPO. Snapchat CEO Evan Spiegel didn't take the payday, perhaps believing there was more to gain by standing firm. But did he make the right call? The social video platform's market cap reached $30 billion during its IPO, but fell to $15 billion a few months later.
"In hindsight, I would have taken Google’s buyout and tried becoming Google’s Instagram," says Sean Cullen, executive vice president for product and technology at data-driven marketing company Fluent. "Instagram’s acquisition price of $1 billion seems very low nowadays, but Facebook allowed Instagram the opportunity to pursue a growth strategy that wasn’t dictated by public market pressures."
Predicting what will come for Snap Inc. is a hotter industry topic than trading iPhone rumors. The company's biggest problem isn't the notoriously fickle nature of its target demographic or even the way it's closed approach prevents content from going viral. No, it's biggest problem is that Facebook keeps copying its features and doing them better.
"Facebook and Instagram have added several Snapchat-like features in an effort to drive usage, particularly hoping to pull users away from Snapchat," notes Brett Sappington, senior director of research for Parks Associates. "Facebook knows the digital advertising space well and has a large base of advertising clients. So, ad spending with Facebook and Instagram is seen as a safer bet than Snapchat."
Not that all is lost for Snap. It launched a new ad manager (inspired by Facebook's own solution) that allows better campaign targeting and tweaking, and also offers more data to advertisers. On Friday, Martin Sorrell, CEO of advertising and marketing company WPP, said his company would double its spending on Snapchat this year. That would add up to $200 million, a figure that's small stakes for WPP. "You're talking about a flea on the elephant's backside," he told CNBC. His company will spend over $2 billion on Facebook this year.
"Snapchat should loosen its stance on non-personal accounts, and welcome the world’s media publishers, TV networks, sports leagues, teams, brands, and creators to its platform to produce stories and build a relationship with people who love its content organically," advises Nick Cicero, CEO and founder of social video analytics company Delmondo. "By opening up an organic measurement API and providing influential accounts more analytics, and encouraging more of these types of people to join Snapchat and produce more content, you’d expose an entirely new audience of advertisers to the platform who have resisted spending any money with Snap because it seemed too hard."
Look for more press when Snap releases its second-quarter financial results on August 10. Many will be watching to see if the battered but beloved company can bounce back.
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