Snap Into the New Year
The Case for Optimism for Snap Inc.
How will media look in 2018? This is a question that has been top of mind for people in the industry, and there are plenty of more specific questions that follow. Will the government get around to regulating the dominant tech companies? Will Facebook, Google, and Twitter be required to disclose more information about who is using and advertising on their platforms? Will there be more huge media mega-mergers?
The topic I’m most interested in has been all over the place this year, Snap Inc. Snap, of course, went public in March. After briefly hitting a high of just under $30, it has struggled mightily in the markets, and currently sits around $15. This has been, obviously, less than ideal.
There has been plenty of negative press for Snap. Poor earnings calls. Stories about warehouses full of unsold Spectacles, indicating a huge miscalculation about their potential sales. Its main product has been utterly ripped off by Facebook, which has rolled out Stories on all its platforms — most notably Instagram — and begun aggressively pursuing opportunities in augmented reality and augmented reality advertising.
And yet, I think there is a great deal of hope for Snap, for a few reasons. First, there is a strong trend that is moving to separate the “social” and “media” pieces of our digital experience. I cannot put this any more succinctly than Taylor Lorenz, technology reporter at The Daily Beast and expert in all things Gen Z, does in a short piece she wrote for Nieman Lab. For this reason, I must quote her at length:
But in 2017, the novelty of racking up a million followers on Instagram or seeing what your third-grade crush is up to on Facebook has washed away. Tweeting out your opinions only to be shouted down by Nazis has caused many users to abandon posting on open social networks and instead spend more time in closed networks and group chats.
This means less time scrolling through your Facebook or Instagram feed and more time posting in Facebook Groups or connecting with friends via Messenger. It means abandoning the quest to respond to every confused man on Twitter and instead DMing with groups of people who matter. It means maintaining several small, interest-based Instagram accounts or Finstas, rather than a single, public-facing persona.
As users migrate to these closed systems, they’re also shifting away from the type of broad-based algorithmic feeds packed with news and media content that were the hallmark of first-generation social media. This isn’t to say that people are consuming less media; they aren’t. However, I predict that media consumption will become a more separate, intentional behavior.
Lorenz was not just predicting things in a vacuum, but reflecting back something that had been building for some time. In fact, Evan Spiegel, co-founder of Snap, wrote an op-ed for Axios in late November in which he showed his belief in the same principles that Lorenz is pointing out.
In his piece, he argues that Snapchat is an escape from social media, and Snapchat’s lack of a curated newsfeed based on your friends’ interests, and not necessarily your interests, is a huge advantage. It cuts out the noise, and instead of a feed offers the Discover page, full of quality content created by hand-picked partners.
The Snapchat solution is to rely on algorithms based on your interests — not on the interests of “friends” — and to make sure media companies also profit off the content they produce for our Discover platform. We think this helps guard against fake news and mindless scrambles for friends or unworthy distractions.
While many people view Snapchat as a social media service, it is primarily used to talk with friends — like visual texting. Snapchat began as an escape from social media, where people could send photos and videos to their friends without the pressure of likes, comments, and permanence.
Some of this, of course, is the sunny viewpoint of a CEO in a bit of a rough patch. Spiegel also announced that Snapchat would be undergoing a redesign in an effort to further separate the social aspect of his platform from the media available. Part of this is taking advantage of a trend he sees, reflected by the media covering the industry, and part of it is pushing a narrative that favors the company because he needs to show some kind of positive progress to shareholders. Still, both of these things can be true, and in this situation I believe they are. Snapchat is well positioned in the current climate, and Spiegel is working to make sure they don’t miss what could potentially be a crucial moment.
But that’s not my main reason for optimism when it comes to Snap Inc. No, that comes from the kids.
It’s well known that Snapchat is a favorite for teens, bur recent survey data paints a picture of just how much of a favorite it actually is. According to an RBC Capital social media survey, 79% of respondents age 13 to 18 have a Snapchat account, against just 73% who have an Instagram (the second closest) and 57% who have a Facebook.
Perhaps more importantly, 44% of that age group selected Snapchat as the one account they would keep if they were “trapped on a deserted island.” Instagram finished far behind with 24%, and Facebook finished with just 14%. Snapchat won this category last year, but with only 28%, which shows that it has drastically improved its performance among teens in just one year. Any way you slice it, it’s trending up.
This survey reflects what has been found in many recent surveys about this topic. Snapchat is not only popular among teens, it is increasingly popular. This chart, created by Axios’ Andrew Witherspoon with data from Piper Jaffray, shows the trend over the past 18 months.
So what does it all mean?
Well, if history repeats itself, these teens are likely to age. In two, or three, or five years they aren’t going to be teens anymore, they’re going to be in their twenties. People in the early twenties, unsurprisingly the second most likely group to use Snapchat, are going to be in their late twenties and early thirties. And these folks don’t just use Snapchat, they love it. They aren’t there just because they need to be, they list it as their favorite social media platform.
As long as Snap can stay relevant with teenagers, something it has continued to do over the past few years, its user base is going to grow, get older, presumably get wealthier, and be easier to monetize. More traditional advertisers won’t be able to ignore Snapchat as a potential channel, and their revenues will grow.
And that’s the case for Snap Inc. When considering its youthful, committed user base together with Snap’s preparedness for the coming changes in media one comes away with an optimistic view of the platform’s future. Perhaps 2018 isn’t the year that Snap Inc. breaks through completely, perhaps it will suffer another setback at the hands of Facebook, and perhaps its redesign will fall flat. Even if these things do happen, though, it has the committed, interested user base necessary to grow and continue to succeed.
