You’ve seen it before: tech company goes public, the crowd goes wild and everyone’s wondering about its future. But this one might be more intriguing than the previous stories. Hopefully it won’t vanish as fast as its messages.
You know about Snapchat - the social-network-slash-disappearing-messages-slash-media-posts mobile app that approximately 150M cool kids use on a daily basis. And it has been an interesting evolution to follow: what started as a way to send disappearing photos to your contacts has slowly evolved into a lot more. And it’s the more that I want to focus on.
Snapchat is no longer just about chat. It has effectively become a media consumption and creation app. And perhaps this hints to the general direction of the company (if dropping chat from the name wasn’t clear enough). Yes, the majority of users are probably still using it just for the chat and filters, but there’s a significant user-base that’s just opening it to check out stuff 1. As it grows, expect people to use it less and less for communication, and more and more for eyeballing - I believe that if they’re not there yet, they will eventually converge towards the 80/20 rule.
Snapchat is actually more like an early days mobile version of Youtube than a media messaging app!
The usage of the camera and features like Stories turn Snapchat into a great media-broadcasting app (just ask Justin Kan). It effectively offers an easy way to create content that can be done by anyone! No need to add a title, description, tags, or anything else to your post - just snap and share!
But Snapchat isn’t limited to content from your friends or people you follow - there’s branded content. And once the product evolves (eventually incorporating long-form content?), we’ll start seeing more music-video debuts and perhaps even original content à lá Netflix!
Business wise, a new-wave digital media (video and interactive content) company makes a lot of sense. TV ad money is flowing into the digital world, no matter what some might be saying.
One big way Snap thinks it can do this is by grabbing TV ad budgets, a shared goal with digital giants like YouTube and Facebook. This money has been slow to move from TV to digital video, but Snap thinks it’s in the best position when that accelerates.
That’s because Snap considers Snapchat ads already superior to those on television, and way better ads than other digital video competitors, according to the Snap S-1 filing. We previously looked at Snap’s argument for why that is, and in the wake of the IPO frenzy, it’s a good time to revisit it.
Snap is in the pole to capture a large share of those dollars. While Snap might be following Twitter’s revenue growth footsteps, Twitter hit a point where they had no guidebook to follow - the product hit limitations on how to make money. Snap won’t have that problem for a while - they can follow TV’s guidebook, a cow that will produce milk for many years to come.
Competition and New Products
The Great TV Ad Dollar Migration hasn’t been unnoticed by Facebook and Google. That’s one of the reasons Facebook/Instagram/WhatsApp (FIW) have been rushing to copy Snapchat. And Youtube is trying out new old things like launching a TV service!
But there’s always this problem with playing copycat and adding to your existing products features that bring in unnatural use-cases versus a product that’s been adding features through “evolution”. The former case is not just making a mess out of their product but there are natural limitations to where it can go (without big redesigns). It’s easy to copy, it’s harder to come up with new ideas that make sense. How the FIW apps will evolve is a big mystery (and the fact that Facebook hasn’t had much success of late with copying is also an added factor of interest).
Snapchat has much less baggage to carry, e.g. it’s still mobile-only AND they only care about high-end devices; contrast this to WhatsApp, who has historically gone the extra mile to make sure they run on every device. In terms of product development this has a huge impact - Snapchat can be lean and try out many different things quickly and release things in no time; the others will at most only be able to roll out features progressively or risk taking too much time.
From the FIW bundle, I can only see Instagram being an actual challenger to Snapchat, and even they will need a big redesign to effectively compete, assuming that’s their priority. If not, they risk irrelevance. It’s easier for Snapchat to invade Instagram’s turf than the other way around.
Youtube is another competitor for the Ad Dollars, but they come from somewhere else. Youtube is the incumbent, the default place for online videos. That’s why it makes sense for them to launch a TV service, it’s Cable TV that they’re thinking about, not ephemeral messaging apps. Youtube was never mobile first and the default use case when opening their mobile apps isn’t to record a video, but to consume videos. And that’s ok, because that’s what most people want to do. And uploading a video follows a process closer to what professionals do, because Youtube’s thinking about “quality” videos, not shorts, with crappy image quality, of people getting lost at sea. And this mentality is their weakness, for they are going for the same treasure chest.
In order to reach the promised land, Snapchat needs to change. Quite a lot. My opinion is that they will ultimately need to tear down their walled gardens and hold the interesting content for longer so that it becomes available to anyone, not just followers. An open model, similar to what Twitter has, is actually something to follow. Content is king, and that should be their focus - helping users create good and find good content. That might mean little things like more filters and lenses or trending snaps but other outrageous ideas that Evan Spiegel & co. need to come up with.
The good thing is that they seem to understand this and working towards it. And being based in LA, the capital of entertainment, probably won’t hurt.
Snap has the essentials to go and change how we create and consume entertainment. Let’s see how this goes.
There’s also this giant lurking in the shadows - they’re very good observers, patient and very effective. And they’re also straying into online video, from many different directions. I’m talking of Amazon, of course. It’s not enough that they operate the largest livestreaming platform and are into video entertainment, but they’re also experimenting with regular TV content. The missing piece in the puzzle? Mobile based user generated content. While it’s a stretch that they would go into this market, it’s always something to keep in mind. ↩