Snapchat’s IPO & Social Media Marketers

By Simon Ensor
Social Media 23.02.2017

In the middle of last year we wrote an article about whether marketers should really be paying attention to Snapchat and let’s be honest, the jury is still out on this one especially for smaller businesses. Well with Snapchat (or Snap Inc.) having filed for an IPO and currently pitching to investors it appears that the app is all grown up. So should social media marketers start to take the app seriously as a marketing platform?

Prices can be eye watering

Let’s get one thing straight here. Snapchat love to talk about large brands gaining success on Snapchat – think Wendy’s, Audi and Starbucks but these are brands that are willing to pay upwards of £10,000 a second for prime time TV adverts. Yes, you heard that right, £10k per second. Snapchat is notoriously expensive and time consuming to run any sort of campaign on, whether that be through sponsored content or influencer marketing, which in turn places it somewhat out of reach for the burgeoning SME sector in the UK and globally. It is generally perceived that Snapchat’s current platform is heavily weighted towards brand awareness rather than direct conversions. This coupled with the investment required means that for most businesses the platform offered by Facebook, Instagram and, dare we say it Twitter, are for more attractive.

Focus on Revenue

Snap Inc’s IPO has given everyone a deeper look into how the business is actually performing. Be warned, the figures are astronomical and not necessarily in the right direction. Snap Inc lost over $500 million last year, an increase from the previous year. We’re sure that investors may be reassured by the reputed $100 million on R&D and the potential for further advertising revenue as the platform matures. Either way, $500 million in a single year is a pretty darn large red figure.

The good news though is what this may mean for social media marketers. Investors will want to see Snapchat’s ability to generate positive revenue. How would they do this? You guessed it – advertising. Snapchat will need to demonstrate that they can quickly scale their advertising model which will no doubt mean making it far more accessible for brands. Most believe that Snapchat will include a bidding style platform for sponsored content to automate the process and increase revenue. This push for revenue can only result in the platform becoming more ‘marketer friendly’.

Stories (Instagram and Whatsapp)

Snapchat have been arguably the fastest moving social network in terms of bolting on additional features for their users. The Snapchat lenses are nothing short of genius although we are yet to see whether their new proposed glasses will be a hit where Google glasses were certainly not. All of this innovation is encouraging for investors and marketers alike, but the growth of Snapchat and their 158 million daily users (in Q4 2016) has peaked the attention of a certain Mr Zuckerberg. Snapchat stories have been so successful that Facebook decided that unapologetic plagiarism was the route forward. Instagram stories were unveiled to their 600 million + users last year to combat Snapchat’s success. Not content there, Facebook have now gone and rolled out video statuses or in their words “You can now share with your contacts photos and videos that disappear after 24 hours”. Sounds familiar.

This presents a significant problem for marketers looking to invest in social media campaigns on Snapchat. If the biggest kid in this digital playground is happy to plagiarise Snapchat so blatantly, is it worth the investment? The biggest blow to Snap is that their growth rate slowed in Q4 2016 which has strong correlation with Instagram’s release of their own stories functionality, indicating that they may struggle moving forward with other platforms copying their model.

The Positives for Marketers

Snapchat is popular. Really popular. Especially amongst the younger generations. If you are a brand that wants to access this demographic through video content then it does present a platform upon which your creative minds will be able to demonstrate their worth.

When social media platforms go public it can have a profound effect on them. When you raise what is reputed to be over $3 billion via an IPO there are suddenly a lot of dollar bills (and their bullish owners) who want to see their investment grow, opening up the opportunity for increased marketing on the platform and therefore access to their user base.

The Negatives for Marketers

The immediate reaction to whether Snapchat’s IPO will make it more marketer friendly is that it will require a more accessible (and cheaper) marketing platform. Without this, Snapchat will, on the whole, remain a platform upon which larger brands can experiment with their money. Not something that those further down the food chain will likely want to do, especially considering the targeting, analytics and potential direct monetary returns offered by the likes of Facebook and Instagram.

Snapchat has a young and tech savvy demographic. On the face of it this would be a positive, giving access to a generation who are avid users of their phone and the platform (users under 25 spending 30 minutes a day on Snapchat on average). However, there are concerns around this generation’s willingness to be early adopters in new platforms therefore highlighting the potential of Snapchat becoming another Vine.

Which side of the fence do you sit?

It is great that ‘Snap’ are going public, who doesn’t love an underdog story? It also means that some of this additional scrutiny is filtered down to the masses and provides us as marketers with more data when selecting platforms upon which to run campaigns. Snapchat certainly has potential but at the moment we feel that the value offered for marketers is too specific at this point in time. Of course, if you are a brand that fits that niche then it could provide significant value as part of your wider marketing campaign. If you are not in this niche then it doesn’t make much sense investing the time and capital to run campaigns on a platform just because it is a new, growing platform.

Unfortunately for this young gun there are better investments for social media marketers to make. Hopefully this IPO will mean that Snapchat continues to mature as a business and widen its demographic as well as its marketing offering. There is the argument of being an early adopter but we struggle to look past the success of Instagram stories and the subsequent plagiarism of Snapchat by other larger players in the market. Sorry Snapchat.

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