Snapchat now wants to be big, global and ubiquitous
NEW YORK: Snapchat executives had a coherent message when they pitched the company’s initial public offering (IPO): It will never be for everyone in the world. It didn’t have and didn’t want the global masses of Facebook with its nearly 1.3 billion daily users in every corner of the world. Instead, Snapchat had a deliberate strategy to concentrate on people — mostly young people — who use its app avidly in North America, Europe and other places.
This focus was great, Snapchat pitched, because those countries are the ones with the largest markets for advertising, which is how parent company Snap Inc makes nearly all its revenue. Those advertisers are desperate to reach young people, which Snapchat has attracted in spades.
Less than three months after the IPO, Snapchat’s mission statement is far less coherent. “We believe that Snapchat was for everyone,” said chief executive officer Evan Spiegel on an earnings conference call on Wednesday.
He said Snapchat develops its new creations for older people, not just the teens and twenty-somethings who now use the app the most.
Spiegel talked at length about how more of the world will be able to start using Snapchat as fast mobile Internet service and highend smartphones get into more people’s hands in countries such as India.
“We think over time, as connectivity grows, more people would be able to use our products and get value from them,” he said.
Which is it, Evan? Is Snapchat trying to become as big, global and ubiquitous as Facebook, or not? What we have here is a failure by Snapchat to consistently communicate its strategy, or a failure in its strategy, full stop.
Yes, it’s true that Snapchat can focus today on people and advertisers in rich countries and at the same time lay the groundwork for its future in places where the majority of the global population lives.
Spiegel, in response to analysts’ questions, said the company was focused on North America and Europe first and then would expand the number of Snapchat users and revenue in the rest of the world.
The implication is that Snapchat was relatively niche now but has ambitions to be big and ubiquitous. That seems logical, but that’s not really what Snapchat said even in late February when it discussed its prospects with potential investors.
The company said at the time that it wanted investors to love Snapchat for its focus on a smaller group of devoted fans who use Snapchat 30 minutes a day, on average.
The zeal of those Snapchat addicts, in countries with large pools of ad dollars, was the company’s greatest asset.
“We benefit from the fact that many of our users are in markets where we have the highest capital efficiency and monetisation potential, allowing us to generate revenue and cash flow that we can then invest into future product innovation,” said Snapchat.
The company bragged that more than 60 per cent of its daily users come from the 10 countries that are responsible for 85 per cent of spending on mobile advertisements.
That IPO sales strategy somewhat mitigated the inevitable and unflattering comparison to Facebook, which in the last 12 months added more daily users than Snapchat has in total.
The pitch went that Snapchat was better because the vast majority of people who use Facebook and particularly all of Facebook’s user growth was coming from countries where it would be tough to generate advertising sales.
Snapchat doesn’t have all the users in the world, but it has the most valuable ones, the IPO pitch went. Bloomberg
“We think over time, as connectivity grows, more people would be able to use our products and get value from them.”