Can Snapchat Innovate Its Way Out of Its Coffin Before Instagram Hammers the Final Nail?
Snapchat not only sees itself as a camera company, but also as an innovation company reinventing the camera. Facebook heard that and said, we’ll take your camera company and release the camera as a platform! This move was just one more nail in Snapchat’s coffin. With Facebook as an imminent threat, will Snapchat be able to innovate to survive?
Snapchat is “Cool” But That’s Not Enough
Snapchat does have some things going for it, like high average revenue per user (ARPU) and 18 minutes per day of time spent on the app which is impressive for a new company as Tom Dotan reports from The Information. Yes, Snapchat is cool among Gen Z. Google has a handy report on what’s cool to teens confirming that Snapchat is the coolest platform (spoiler alert: Facebook doesn’t rank high; however, Facebook is still a daily habit among this group that sees social media for consuming and connecting, not sharing). Right behind Snapchat on the cool scale is Instagram, but this isn’t what is keeping Snapchat’s CEO Evan Spiegel up at night – there’s a long list of other reasons.
Facebook is Directly Impacting Snapchat Growth
At the top of that list I would imagine is stalled user growth on Snapchat following the release of Stories on Instagram and Facebook.
Instagram is borrowing inspiration (that’s an understatement!) from Snapchat on a number of features: Stories, Location Filters, AR Stickers, Create-Your-Own-Stickers, and ephemeral messaging. As Instagram does this, Snapchat is seeing its stock price drop and growth sink: “the stock dropped another 1.25 percent after the news that Instagram Stories has eclipsed Snapchat’s size. Snapchat’s growth sank 82 percent after Instagram Stories launched” as reported by TechCrunch’s Josh Constine in his article Instagram Stories hits 200M users, surpassing Snapchat as it copies its AR stickers.
Josh Constine also points out, “At this point the only major feature left for Instagram to copy is Snapchat’s animated selfie masks, which Facebook already has in its app and Messenger thanks to its acquisition of MSQRD. And with Instagram’s Stories reaching more users per day than Snapchat’s whole app, Instagram may be able to get preference from advertisers seeking maximum scale.” In this video released by Facebook about its camera, you can see the “masks” that mimic Snapchat’s animated filters.
Facebook is Improving on Snapchat’s Products
Not only is Instagram Stories outperforming Snapchat’s app, Instagram is taking Snapchat’s products and making them better. For example, Snapchat released a new upgrade to its Lenses on April 18, which impressively adds 3D stickers into users snaps enhancing the augmented reality creative tools for its users.
Then you see what Facebook is going to release with AR and Lenses doesn’t look too impressive anymore. At F8, Mark Zuckerberg demoed not only AR visuals for users, but AR visuals that interact with the surfaces and environment they’re in! While Snapchat can put a rainbow over the head of someone in a photo, Facebook/Instagram will allow users to have AR sharks swim in and out of a real table around a real mug!
Instagram Stories Outperform Snapchat Stories
In a way that only Professor Galloway from L2 Inc. can put it on why Snap is a Terrible Investment, “[Snapchat] has probably the most agile and competent company in the world—Facebook has decided that they will kill Snapchat no matter what…I think Mark Zuckerberg is going to get his way. I think they are going to erase Snapchat from the planet.”
Professor Galloway also points out that brands that post the same content to Snapchat and Instagram Stories see more views on Instagram. This is a trend influencers are also seeing. WWD reports that influencers are moving off of Snapchat to Instagram and seeing more views on the platform too:
Ferragni was using Snapchat heavily before — where on average, her stories would get 260,000 views — but has since moved almost all of her social media video to Instagram (she still posts on Snapchat). She maintained that when she started posting Instagram Stories they garnered an average of one million views in a 24-hour period. Now, her stories average two million views in a 24-hour period.
The article also points out Instagram has shifted from perfect imaging to less polished and more authentic, real glimpses into people and brands’ worlds which is very welcomed, but I digress.
Instagram is Innovating for Brands
On the brand side, Instagram is also giving ecommerce brands more reasons to shift efforts and budgets to Instagram. One big reason is shoppable posts. I got excited when we could easily link off of Instagram in ads and in Stories, but with shoppable posts brands can tag products within the post and be taken to a product carousel that features more information about the product. From there, if the customer wants to purchase an item, the user can click a “shop now” button that takes them to the retailer’s mobile product page!
Instagram is leveraging its scale and advertisers are following suit. In fact, it just announced that that platform has over one million advertisers:
In the last year, Instagram had more change than the previous five. We introduced Instagram Stories—a new way for businesses to share everyday moments—video exploded, we welcomed a new brand identity and the community grew to more than 600M globally. At the same time, we were building a thriving business. We now have 8M businesses using business profiles, with the greatest adoption coming from the United States, Brazil, Indonesia, Russia and the United Kingdom. We also have more than 1M monthly active advertisers—up from 200K this time last year—and, in the last month, over 120M Instagrammers visited a website, got directions, called, emailed or direct messaged to learn about a business.
Instagram is also giving more tools to advertisers, like carousel ads and full-screen ads within Instagram Stories, and is likely to rollout more brand-friendly tools too.
Can Snapchat Turn a Profit?
Prior to Snap’s IPO, in The Information’s 411 Snap’s Lumpiness podcast episode, Tom Dotan and Reed Albergotti point out that Snapchat did a great job building excitement around the launch of Spectacles. The product itself is well designed and thought-out too. The company can innovate as seen through the sunglasses and by creating the new video format “Stories,” which Facebook openly gives them credit for developing.
With any IPO comes its own challenges too. Tom and Reed share that Snapchat is already warning investors that the revenue following the holiday spending may be “lumpy.” It’s also worth noting in Snap’s S-1 filing, one of the potential weaknesses is the inability to make profit. Under their “Risk Factors Summary” it reads, “We have incurred operating losses in the past, expect to incur operating losses in the future, and may never achieve or maintain profitability.” I haven’t read enough S-1 filings to know if this is common or not, but it certainly seems like a red flag to me. Snap’s first quarterly investment call is scheduled for May 10, so it’ll be interesting to hear if Q1 was lumpy or not and what the company reports.
Snapchat May Disappear Like Its Messages
At the end of the day Snapchat needs more than the attention of today’s teens to solidify its future. Single product features alone aren’t the solution, and Snapchat’s past innovations aren’t enough to keep the company afloat. They could possibly get more into hardware given that they are a “camera” company, but this would also mean finding a way to pivot or merge hardware with their current advertising revenue model. Snapchat not only needs to keep and grow its users; it also needs advertisers. The company’s biggest challenge will be finding a competitive advantage outside of “being cool” against Facebook, and a way to keep Facebook from “borrowing” what they do.
Cool comes and goes. Snapchat can innovate, but will they figure out how to stay competitive? If not, the company will disappear like its ephemeral messages it made popular.