12 May 2017 | Melanie Kamdar

Snapchat Sinking – The Beginning of the End for the Social Network?

With news breaking this week that Snap Inc, Snapchat’s parent company reporting big financial losses and a slowing down of new user growth, is the honeymoon over for the social media app of choice for Millennials?

In March 2017, Snap Inc had a successful IPO on the New York Stock Exchange with the value of shares increasing by 73% within the first 24 hours.  However, just two months later prices have tumbled by 25% and rivals Facebook, WhatsApp and Instagram are continually adding features to ensure they are gaining market share from the photo sharing app.

Facebook has dominated social media for the last 10 years but popularity amongst new, younger users has dwindled in the last few years. This was one of the biggest reasons why, in 2012, Facebook acquired Instagram for $1billion and bought WhattsApp for $19 billion in 2014.  However, with the launch of Snapchat in 2011, Mark Zuckerberg and co had a fight on their hands to maintain dominance in the social media battle. Facebook tried to acquire Snapchat for $3billion 3 years ago. This was pennies compared to the $28billion valuation it received after the first day of trading.

smartphone with social network icons

So, what’s gone wrong with Snapchat?

Snapchat’s initial popularity hinged on the fact that images disappear after a few seconds of the receiver opening them. However, with WhatsApp and Instagram also beginning to add similar functionality to their messaging services, Snapchat began to concentrate on augmented reality filters that can be applied to enhance the images sent via the app.  We’ve all seen images “enhanced” by the addition of a flower crown, puppy dog ears and airbrushed skin.

However, just as the disappearing image USP has been copied, Instagram added its own “stories” feature to its functionality. In April 2017, Facebook launched an augmented reality Camera Effects developer platform.  A bold statement of intent that it is determined to go head to head with Snapchat’s features.

The number of people who use Snapchat every day increased by 36% year on year to 166 million in April, which on its own sounds impressive. But when you take into account that this is down from 47% growth in the previous quarter and that Facebook has 552 million regular users, it becomes apparent that Snapchat’s figures may not be good enough.

What does this mean for the future of Snapchat?

It’s not all doom and gloom in the Snapchat camp.  Earlier this week it fought back against its competitors with the launch of its Infinity Update.  The new version of the app comes with loads of new features the most noticeable of which is the option to make the photos and messages you send stay on-screen for a long time, instead of disappearing after ten seconds. It’s also added a loop function to videos which looks alarmingly similar to Instagram’s Boomerang app.

Instagram video

Commercial opportunities

Currently, if you want to buy Snap Ads you have to go through Snapchat’s own sales team or pay 3rd party suppliers.  However, the market will really get a shake-up in June when Snapchat rolls out its free to use self-serve ad manager.  This suddenly makes Snapchat ads highly accessible to all companies, big and small.  It is worth noting that although they have a smaller overall market share, 35% of Snapchat’s daily users simply aren’t on Facebook and 46% aren’t on Instagram.

Will the new updates and the demographic of its users be enough to keep Snapchat in the social network fight? Ask me again in 12 months time.  For now at least, if you need to communicate with Millennials and/or Generation Z then Snapchat is the best place to reach them.

Why not speak to the social experts at Tamar and find out how you can reach your target demographic through social media and convert them into loyal fans and paying customers?

Melanie Kamdar

Client Services Director at Tamar.