SNAP’s Struggle

Despite a fair amount of negative sentiment toward SNAP, I do believe they play an important role in the industry, and may play a bigger one in the future. SNAP’s positioning of themselves as a camera company is one of the most interesting focal points for me as I study them. Despite their overall challenges, I know one thing for certain that should not be underestimated. SNAP has an absolute lock on US teens and most US millennials under 30. For this reason, SNAP’s growth story being tied to Android is a pipe dream.

Android Won’t Help SNAP
I’ve always wondered how much SNAP’s executive management truly believes in the Android story they keep telling Wall St. SNAP CEO Evan Spiegel seemed confident that their growth story was held back because of a poor implementation of the SNAP Android app. Now the Android app experience has been made better, on par with the iOS experience, there is still no indication of a user growth story. The reason is simple. SNAP’s target audience is on iOS.

As I stated above, the vast majority of SNAP’s userbase is in the US and the generation under 30 who is largely on iOS. SNAP has a lock on this demographic and interestingly, I hear over and over again from parents with kids entering their teen years how their kids are pressuring them for a Snapchat account. So it seems the upcoming Gen Zers will all likely contribute to SNAP’s userbase. In fact, I could make a case at this point that Gen Z will be more invested in Snapchat than millennials are as a whole. Notably, this demographic also longs for iPhones.

In short, I don’t believe the Android story will help SNAP. Their target market simply isn’t and doesn’t want to be on Android.

SNAP Ads Upside
When I evaluate these social platforms, I pay close attention to the ads. And specifically, the type of brands and how those brands are using the platform. It has always intrigued me that SNAP has been able to attract more ads that are brand building, like what you see on TV than what we see on Facebook or Instagram which are direct-to-consumer ads looking to drive conversion. More often than not I’ve never heard of the brand/product of an ad I see on Facebook. Which psychologically is a hurdle because I am not sure if I can trust the company or the product to be of any type of quality. The result is if I’m interested in the product I have to spend a lot of time researching it to see if I can trust it.

SNAP not only shows more brand-centric ads from known companies looking to drive their brand strategy, but they are also much more entertaining. The quality and format of SNAP’s ads are dramatically more tolerable than that of Facebook. Looking at the ads specifically, I compiled a list of the ads I saw on Snapchat and Facebook in a five minute period of using each service.

Snapchat:
Bud light
Exxon Mobile
State Farm
Gatorade
Hotel Artemis Movie Trailer
Zz Quill
Twine
Dairy Queen

Facebook
Headspace
Code42 (GDPR compliance company)
Bonobos (men’s clothing)
Portalus (shoe insert to help with pain in feet)
Thrive (a health pill supplement)
Solo stove (small metal outdoor fire pit)
Jet Smarter (charter jet service)

Most of the brands and products on Snapchat are known to me and most of what I see on Facebook I have never seen or heard of before. Again, very different strategies on how companies use each platform. While it is true, Facebook and Google own the vast majority of digital ad spends, when it comes to social media advertising we still need to wait and see how companies gauge the return on their investment when advertising on Facebook and Snapchat. But the types of ads Snap is getting tend to be higher budget so they may not need as much volume to still get a good chunk of a brands budget.

The Spectacles Experiment
When some news came out that SNAP was working on a new set of Spectacles, the overall sentiment was quite negative. Yes the previous version did not sell well, and no version two will not sell well either, but I consider these efforts important learning missions for SNAP. SNAP is not a hardware company, but they know hardware will play a role in their future one way or another. SNAP’s efforts to make hardware, in this case, faceware, will yield valuable lessons they can build and iterate on. Their challenge will be more centered on fighting those who want to take the short view when Spectacles V2 bomb in sales. And the short view is what most have taken with SNAP.

I still have an optimistic take on SNAP and even if they struggle with the business on their own they make an attractive acquisition target for many and I have no doubt the service will thrive in way or another.