In case you missed it, Snap Inc., the parent company of Snapchat, listed on the stock exchange yesterday. Shares in the Snap rose 45% on opening, taking the stock price over $ 24 per share, well above the original target range, while the IPO was also twelve times oversubscribed, meaning that there were twelve times more orders for than there were shares offered.
For all the talk about growth concerns amid rising competition from Facebook, the market is clearly still enamored with the possibilities of Snap Inc., but there are many questions surrounding the company and how it plans to evolve.
Will Snap Inc. sink or swim?
Here are five key questions being asked about Snap and where the company is headed.
1. Facebook or Twitter?
Be prepared to see this question repeated over and over for some time yet – at least until the answer becomes somewhat clear: “is Snap Inc. the next Facebook, or the next Twitter?”
And the query makes sense – any company built on social networking is inevitably going to be compared to Facebook, as Twitter was, and it’s almost equally inevitable that such comparison will end up being unfavorable for the newer player.
But while the logic of the question is valid, the reality is a bit of a stretch.
Facebook’s growth is unprecedented, amazing – comparing any future platform to Facebook is almost universally unfair. It’s something that has continually hurt Twitter and its perception, which many believe was a key motivating factor behind Twitter’s decision to shift their app into the ‘News’ category on The App Store, and out of the ‘Social Networking’ arena. This may also be why Snap Inc. is working to frame itself as ‘a camera company’ as opposed to a social app.
In reality, the likelihood that Snap Inc. is ever going to reach the heights of Facebook is extremely low, so the comparison isn’t really fair – but at the same time, Snap doesn’t have to reach such levels to still be a major success.
That’s part of the difficulty of the inevitable Facebook comparison – most people know that Snap is not going to reach Facebook’s level, but it’s more of a broad-strokes comparison, a statement on whether the company will flourish or flounder. But even making the comparison puts Snap into an uphill battle in terms of perception. Basically, the comparison to Facebook should really not be in play at all, Snap Inc. is not Facebook, Evan Spiegel is not Mark Zuckerberg, the two are not on the same path.
And as noted, they don’t have to be – Snap can still be huge without ever reaching Facebook’s level of ubiquity.
Will it be the next Facebook or the next Twitter? Neither, Snap is forging its own path, and their trajectory is likely to be very different.
2. Do Influential Creators Matter?
Another key question around Snap Inc. – and Snapchat specifically – is whether the platform’s lack of effort to engage creators and influencers is going to come back to hurt them.
BuzzFeed journalist Alex Kanrowitz recently published a post which outlined a range of concerns on this front, noting that many of the platform’s most prominent creators are now migrating to other channels, including Instagram, because Snap Inc. basically goes to no effort to establish relationships with them.
As per BuzzFeed:
“[Snapchat creator Mike] Platco, who says he owes his fame to Snapchat, is now working to move his followers to Instagram. He feels it offers the type of support Snapchat hasn’t — listening to product feedback, providing post analytics and promotion. “I love Instagram,” Platco said. “Every single bad thing I could possibly say about Snapchat, I could say the opposite of how my relationship is going with Instagram.”
Snap Inc. even confirmed this – in a comment to Kantrowitz, a Snapchat spokesperson said that the company’s focus is on friends and family, not influencers.
Which is fine, and makes some sense, but it also ignores the fact that it’s creators like these that actually draw a crowd to their platform – thousands of people come to Snapchat to see what these high-profile users are going to post next.
Snapchat’s approach is also in counter to other platforms – for example, Facebook was recently working on deals to pay live-stream stars to come across to Facebook Live, while one of Twitter’s key pillars for future growth relates to encouraging more creators to the platform. They’re not going to these efforts for no reason, and they’ve both been in the game for longer than Snapchat has. Can Snapchat hold to its ‘friends and family’ focus and still deliver the growth needed to meet the demands of the market?
It may not seem like a big deal now, but as we’ve seen with Twitter, audience growth is crucial for a listed company, and having influential users draws a crowd. There may come a time where Snap Inc. sees more value in this – but at the same time, this is not some huge revelation, it’s not new information Snap Inc. isn’t aware of.
And this then leads to one of the more pressing queries around Snapchat – they know this, they must be aware of the potential problems this could create down the line.
Do they have a plan to counter such issues? Does Evan Spiegel know something we don’t?
3. A Camera Company, Really?
As noted, Snap Inc. has sought to frame itself as ‘a camera company’ rather than a social networking service.
As noted in their S-1 filing:
“We believe that reinventing the camera represents our greatest opportunity to improve the way that people live and communicate. Our products empower people to express themselves, live in the moment, learn about the world, and have fun together.”
This is not quite as ambitious than Facebook’s “connect the world” mission – though, to be fair, Zuckerberg’s pre-Facebook IPO mission statement was a little less grandiose (“We hope to strengthen how people relate to each other”).
But is Snap Inc.’s camera focus real – or is this, as mentioned, a hedge to avoid unfavorable comparison to Facebook?
As we’ve reported previously, Snap’s camera focus may actually be legit – with increased emphasis on Spectacles as their next-level growth option, as opposed to Snapchat itself.
The theory here is that Spectacles, even on launch, were developed to incorporate augmented reality functionality, that they were always intended to be more than simply sunglasses that record video. Pressure from Facebook – through the launch of Instagram Stories – and the need for an IPO may have forced their hand a little and pushed them to release an early version of Spectacles with limited functionality, but the accompanying release of ‘World Lenses’, which layer digital content over your real world surroundings, and news of increased spend on research and development, particularly in AR, all point to this being a bigger area of focus than we’re currently seeing.
Snapchat World Lenses in action
What if Spectacles – not Snapchat itself – was actually where they were headed? What if Snapchat took the $ 3.4 billion it’s now raised via IPO and put it into the development of a new, next-level version of Spectacles which incorporates such functionality?
That would certainly side-step Facebook, keeping them out of the direct social networking path, while it would also give Spectacles users a whole new experience – a new way to “live in the moment”.
Of course, nothing has been mentioned about this in the Snap Inc. investor roadshow – but then again, the company can’t reveal too much about their future plans in case Facebook gets wind too early and duplicates them again, diluting their impact.
This may not be the actual path Snap Inc. is looking to take – and as we saw with some of the recent demo shots from Magic Leap, creating a compact AR system comes with many challenges.
But still, it’s very likely that AR is going to play a much bigger part in Snap Inc.’s future – including in ad content, which could be a significant evolution.
It’s quite possible that their focus could shift towards camera-specific tools and hardware, and away from social networking.
4. Will the Kids Lose Interest?
Another key challenge for Snap Inc. will be in maintaining its cool factor, and the attention of its younger audience.
Younger users are more prone to switch to “the next big thing”, and new challengers will arise – in order to hold their audience, Snap Inc. will need to keep coming up with innovative, interesting tools and options.
Can they maintain that momentum?
Thus far, they’ve been able to keep adding in new tools like Lenses and Geofilters, newer options that keep users coming back. But Facebook can do much the same, maybe better. And what’s more, Facebook is working to bring Snapchat-like tools and options into regions where Snapchat hasn’t yet gained any traction, lessening the app’s potential take-up.
If Facebook has more users, more features and is used in more regions, Snap Inc. could struggle to keep up.
There’s no way of knowing what the outcome here will be, but it will become a bigger query – if Snapchat loses its hold on younger audiences, their key point of differentiation is largely diminished.
Not only that, Snap Inc. also needs to show that they can maintain the attention of those younger users as they grow up, facilitating their evolving communication needs as they move into more lucrative consumer brackets.
This is a big challenge, but at the same time, no company has shown they understand their audience better than Snapchat.
Producing advanced ad options and innovative features will be crucial to Snap maintaining their foothold in the market.
5. What Else is There?
This final one is probably the key question many have.
Snap Inc.’s IPO filing was not exactly filled with optimism – they noted that they may never make money, that their user growth has been significantly impacted by Instagram Stories, they basically underlined every concern and agreed that all were totally valid. And in counter, they didn’t offer a heap of alternatives.
The key question then is “what else does Snap Inc. have up its sleeve?”
Spiegel and Co. are well aware of all the issues and concerns, they know the industry comparisons and challenges – so what else could they be planning to keep themselves ahead of the game?
This is the crucial consideration for potential investors – do you believe that Snap Inc. has the potential to innovate and keep up the fight in the face of major competition? Facing off with Facebook is no easy task, and while Snapchat has done well thus far, the war is far from over.
Do you believe that Snap Inc. is equipped for the next stage, or is this all they have?
Snap Inc. offers no assurances, but they must have something in the works. Right?
There are a lot of questions, and it’s going to be interesting to see how they all play out, but hopefully Snap Inc will be able to continue innovating and pushing the boundaries of what’s possible, delivering new experiences and tools for us to experience.