Snapchat now wants to be big, global and ubiq­ui­tous

New Straits Times - - Business -

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.”

EVAN SPIEGEL

CEO, Snapchat

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