Snapchat is Evolving

Further to Ben’s piece yesterday, I thought it would be interesting to dive into all the ways Snapchat (the app) and Snap (the company) are evolving as the company reportedly prepares for an IPO this year. Both the company and the app are becoming something quite different from what they were in the past and the challenge will be to maintain user loyalty as that evolution continues.

Snap the Company is Evolving

The first thing to note in the context of Snapchat evolving is the company is no longer even called that – last year, the company changed its name from Snapchat to Snap, Inc. as a reflection of a shift from being simply an app company to something more. It now styles itself a camera company, with the app constituting one camera (the camera is still what opens first when you launch the Snapchat app) and its Spectacles hardware product, another camera. The two are of course, integrated, but the Spectacles are also a sign of an evolving Snap, which sees itself as more than just the maker of a messaging app.

The renaming and new tagline open up all kinds of other possibilities for the future — whether an AR/VR headset (perhaps based on Spectacles), more standalone camera products, or something completely different. The fact is, Snap now has a captive audience of (mostly) millennials who spend a lot of time in the app and it can do a lot to leverage that audience into new things, whether those are additional apps and services or more hardware.

Snapchat is Evolving as an App

But alongside the big picture evolution in Snap as a company, the core app has been evolving as well. In fact, the rapid evolution of the Snapchat app has been one of its defining features – it’s hard to think of another app that has successfully added so much popular functionality in such a short space of time. The app only launched in 2011 and, in the five and a half or so years since, it has added video sharing, Stories, video calling, Discover, Snapcash, Filters, Sponsored Geofilters, Lenses, Memories, and much more at a detailed level.

At a fundamental level, Snapchat, in its early version, captured attention from users, mostly teenagers and young adults, and then found additional ways to keep that attention and leverage it to make money. Notably, the ad products in Snapchat are all focused on content of one kind or another. It’s the investment in content that’s really turned Snapchat into something quite different over the last couple of years. The Discover tab has a range of content – much of it not all that appealing to a member of an earlier generation like me – which is designed to keep users in the app and, of course, to show them advertising in the process.

Advertising is another area where Snapchat has evolved significantly in recent months. Having said, in the middle of last year, it would eschew “creepy” targeting of ads, it has in fact invested significantly in new ways for advertisers to target their advertising, including buying offline data from Oracle in a deal announced last week. The biggest challenge for Snap, when it comes to advertisers, is convincing them to spend money when the tools they’re used to from other big online platforms, like Google or Facebook, simply haven’t been available from either an analytics or targeting perspective. That is now starting to change as Snap invests more heavily in these tools but some of these things are likely to cross that “creepy” line as users become aware of them. Snap will have to be careful not to alienate its users in the process.

We’re also seeing a crackdown by Snap on the content shared in the Discover tab. It’s always been a pretty lewd place but some content providers have recently been using racy cover images for Stories that have nothing to do with the picture and Snap has now said it will ban such content as well as any content that links to what it perceives to be fake news. Again, Snap appears to be maturing rapidly as it preps for an IPO, creating a more palatable place for big brands to place their ads while also reducing some of the liabilities Facebook has recently been saddled with as a result of the US election.

Potential and Reality

Snap has shown itself to be both an enormously innovative company and a nimble one, moving quickly to launch new features, making acquisitions where necessary and extending into new areas. There’s clearly lots of potential here, especially given how advertisers covet the audience it has. But, as Ben said yesterday, growth appears to be plateauing somewhat lately and much of its potential is just that and nothing more until it demonstrates it can turn its newfound ambitions into something else. That means demonstrating it really can cross the chasm from experimental to mainstream budgets at advertisers but also successful expansion into new areas – the marketing around Spectacles has been very clever but it’s not nearly as clear that there’s a decent sized revenue opportunity there yet.

Experimenting with lots of new things is one thing but generating meaningful revenue and profits is going to be the next big challenge. It’s not as clear Snap has cracked that yet.

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Jan Dawson

Jan Dawson is Founder and Chief Analyst at Jackdaw Research, a technology research and consulting firm focused on consumer technology. During his sixteen years as a technology analyst, Jan has covered everything from DSL to LTE, and from policy and regulation to smartphones and tablets. As such, he brings a unique perspective to the consumer technology space, pulling together insights on communications and content services, device hardware and software, and online services to provide big-picture market analysis and strategic advice to his clients. Jan has worked with many of the world’s largest operators, device and infrastructure vendors, online service providers and others to shape their strategies and help them understand the market. Prior to founding Jackdaw, Jan worked at Ovum for a number of years, most recently as Chief Telecoms Analyst, responsible for Ovum’s telecoms research agenda globally.

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