What Did We Learn From The Snapchat IPO?

By @TheMarkDalton

Snapchat was once written off by myself and many others as the sexting app for teens. Of the one or two early adopters who were social media managers and insisted that Snapchat was the right play and was going to be big – neither could actually tell me why or what about it gave them that vibe.

Respect to them, they took a gamble on a big play and it worked. Snapchat has grown up, matured and is now owned by Snap. At the time I decided to jump on Snapchat and see what the fuss was all about, there was somewhat of a boom going on.

Influencers, bloggers, marketers and brands were all jumping on board at the same time. Well at leas the few who could sense something or see something there that we couldn’t see before. My experience with Snapchat changed my approach to online marketing because I learned so much from doing it.

I learnt about attention, I stopped being romantic about social networks and started to understand that it was important to go where the crowd is so I had to be ready to adapt to all kinds of social networks. It is that understanding that helped me recognise the fast boom of Instagram stories and why I was able to shift onto that platform quicker than what I have done so before.

I learnt about the importance of depth rather than width. I stopped caring about follower numbers and impressions and started caring about data that actually matters like conversions, visitors and readers of my blog. Snapchat really showed me how important that one on one interaction is and that depth is what is really important.

I don’t use Snapchat as much as I did this time last year for the simple reason that Instagram stories came along and is doing something really special, grabbing user attention much faster than Snapchat and is more friendly for branding and business.

Last week, Snap publicly filed for an IPO which should be no surprise and we have known it has been coming for some time now. The company has been preparing their IPO since last year. With the IPO there comes new data about how Snapchat is doing, so what are some of the things we learnt from the Snap IPO last week?

Growth is slowing

Snapchat was booming at one point and growth was off the charts. Naturally that growth was going to slow at some point but with Instagram stories on the scene it seems to be slowing a lot sooner than expected.

Snapchat was at 150 million daily active users last June. Now that number is 161 million daily active users which is only up 5 million from the end of the previous quarter.

The numbers are not bad but they are much lower than many expected, analysts had predicted that growth would be strong and then start to slow in mid to late 2017 but in fact it has slowed towards the end of 2016.

I have noticed it myself that there are less influencers and brands on my Snapchat creating stories, however they are on Instagram creating in full force.

Attention

Snapchat still gathers in user attention and is a very sticky app. More than 2.5 billion snaps are created daily and users visit Snapchat on average more than 18 times each day.

Users typically spend between 25 to 30 minutes consuming content on the app every day. Snapchat also says that 60% of users are using the chat element which was given a significant upgrade last March.

Revenue

In terms of money, Snapchat lost $514 million in 2016 which is up 38% from the $372 million it lost in 2015. However they did generate $404.5 million in 2016 which is up a massive 589% over 2015. Much of the revenue comes from North America.

Spectacles have been little more than a gimmick to generate marketing buzz and have generated little to no revenue for the company at the moment.

What next for Snapchat?

The future is unknown at the moment, if there are no major product innovations in the pipeline then Snapchat could start feeling the heat over the course of this year and into the future.

With Instagram being owned by Facebook, they are up against some stiff competition. Instagram has almost caught up in daily active users already with the latest numbers being 150 million daily active users.

Snap will spend the upcoming weeks pitching themselves to potential investors ahead of public offering day. They are under no illusions as to the challenge they face and have cited several big players to be potential competition such as Apple, Facebook, Instagram, Twitter and more.

They also note that their demographic is particularly young and as a result could be less loyal to the brand and could switch to another product which would affect growth and engagement.

“The majority of our users are 18-34 years old. This demographic may be less brand loyal and more likely to follow trends than other demographics. These factors may lead users to switch to another product, which would negatively affect our user retention, growth, and engagement. Snapchat also may not be able to penetrate other demographics in a meaningful manner. For example, users 25 and older visited Snapchat approximately 12 times and spent approximately 20 minutes on Snapchat every day on average in the quarter ended December 31.”

Not overly positive for an app which was making big strides last year. Snapchat is still important and I still see the value in it, the experience of jumping in has taught me so much in the space of a year but there could be rocky times ahead yet.

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