Snap, the parent company of Snapchat, had a great day on the New York Stock Exchange on March 2nd, 2017. It gained 44 percent in its debut closing at $24.48 per share, quenching a long drought in the market for tech IPOs.
Now, with Snap successfully going public, a crucial question looms: How can Snapchat keep leading the way? As a public company, Snap will inevitably come under pressure from investors to become more valuable, which not just means increasing in scale, but also demonstrating a satisfactory return on investment. So far, Snap currently generates almost all of its $404 million in revenue from advertising business. The article, Can Snapchat Show Advertisers It’s More Than a Place to Experiment?, pointed out that the growth potential of Snapchat’s advertising business is what would draw investors to the initial public offering, which was set to price on Snap’s debut.
Building the advertising business up form nothing in about two years, Snapchat still faces several problems that have to be solved. First and foremost, most advertisers say that the Snapchat’s advertising system remains overly complicated. On the one hand, Snapchat only adopts 10-second video ads that must be shot vertically so that users can view the ads when holding a smartphone upright, since Snap’s CEO Evan Spiegel has long insisted that ads must not clunk up the user experience. On the other hand, most Snapchat ads are sold through sales representatives. Even though Snap just began to corporate with Viacom to sell its ads through the API (application programming interface), the ad-buying process is still not mature.
From my perspective, the unique advertising content is one of Snapchat’s strengths, making it different from such its rivals as Facebook. The vertical, 10-second video ads standard does force brands to spend more time and money to make at least two versions of the same ads, but it might create a surprised result. Since these brands have to re-edit their ads in order to conform to Snapchat ads standard, they usually re-edit these ads according to snapchat’s users’ preferences, greatly improving ads’ promotional effect. Some even shoot typical Snapchat video ads, and these simple and common life story episodes are more appealing to Snapchat’s users. Moreover, Snapchat did a good job in advertising content innovation. So far, there are three ad products, Snap ads, Sponsored Geofilters, Sponsored Lenses. My favorite should be sponsored lenses, a playful way to make users impressive.
I cannot deny that snapchat advertising system still has a long way to go, especially simplifying its ad-buying process, but I hold a positive attitude toward its future in advertising business, because “the content is king”.
Additionally, Snapchat needs broader reach. According to comScore, Snapchat already has about 70% of U.S. 18- to 24-year-olds and about 40% of U.S. 25- to 34-year-olds. However, the growth within that age bracket came from the small base, millennials. The slowing user growth shows that Snapchat has to find a solution to keep growing its target users after it taps out of its young age groups.
Facebook’s broad appeal across different age groups is the social network’s most brilliant feat. Even if Snapchat doesn’t want to become as ubiquitous as its main rival, Facebook, expanding its user base still requires marketing to older demographics. It’s a difficult but feasible way. In order to gain more older users, educating on how to use the app should be the primary task. As a Snapchatter, I honestly agree that Snapchat’s interface is not friendly to the older generation. For millennials, who are growing up with the development of mobile technology, learning to use a new app should be a piece of cake, while for older generation, it’s tough to figure out.
Exploring global market should be another feasible way to expand Snapchat’s user base. Snapchat does have an outstanding performance in South America, Australia and Europe, but it is struggling to take off in Asia, like China and South Korea, where Snapchat is blocked and similar social media apps perform well. Here, I won’t make a comment on why Snapchat is blocked in these countries, but what I know is Snapchat should not give up these markets, especially China. Having a great number of potential users, China’s market are the next arena for these social media.
Along with market demands changing fast, the mobile technology developing with each passing day, and the life cycle of products becoming shorter and shorter, the competition among social media enterprises become more intense. Maintaining the privileged position will be the most crucial task for Snap in the next few years.
Last but not least, keep sweet every day! 🤗