From free product to IPO: Snapchat Inc. and its business model evolution
Why IPO is a short term policy
Value Proposition of Snap Inc.
A Value Proposition is an aggregation of benefits customer can reach with a product/service. In terms of Lean Canvas, for Lean Startup by Ash Maurya, Value Proposition is the content of Solution you give to your Customers’ Problem.
In general, a Value Proposition can satisfy one or more of theese needs:
- Newness: your product/service is new and solves new problems, or old problems in a new way
- Better performance: think about a faster pc
- Customization: you can have a product with specific features that you want
- Design: think about Apple, design is its competitive advantage, more than other features
- Brand/Status: a product/service can communicate your wealthy, rich, you’re an entrepreneur, and so on
- Price: you prefer to save money, so you chose a lower price product; or you can prefer an higher price because price is a signal, an information. Ceteris paribus, higher price → higher quality
- Risk Reduction: just think about guarantee. You need to have your
- Accessibility;
- Convenience/usability: you can choice a product because is easier to use. Let me think about an example…uh, we have it!
Easy5 is a cellphone so easy to use, that it’s designed for old people. Why we didn’t say Nokia 3310? Because “simplicity” in that phone isn’t the WHY. We’ll talk about this in the next post.
Snapchat offers eterogeneus services.
- Snapkidz: this app was created to solve under 13 kids Snapchat subscription. When you declare to be less than 13, you enter in Snapkidz the no social Snapchat version, where your children can make and edit photos and videos without sharing them on social. The problem persists if they continue to lie.
- Discover: with Discover Snapchat became an online-editor. It has a pool of it owns editors and publishes news of CNN, Cosmopolitan, National Geographic and other professionals. Snap Inc. improve the graphic with a more modern and professional aspect.
- Roll/Timeline: you can roll your photo and choice one, or more to publish.
- GeoFilters “on-demand”: users can create custom GeoFilters to their events and cover a smaller and more specific area. Service cost from $5 to several thousand of dollars
- Advertising
- Spectaculars sells (next par.)
Multi-sided platform pattern: how Snap Inc. makes money today
IPO means Initial Public Offering and it’s a signal, as well as a price of a general product. Signal often means “quality”, “status”, so it’s a risky operation, because if it go wrong it means society isn’t appreciated by the market and the worst/best feature of an IPO is that it’s public: everyone can know its outcome.
Euphoric reactions for Snap Inc. IPO! Ok, consider there were only 30M free purchasable shares out of a total 200M, but IPO always is a signal (check out conclusion). The Company will show its insights to the stakeolders at first quarter of 2017. To offset the slower new users growth of the last period, and to transform losses into profits Evan Spiegel’s trying to diversify the offer with other projects. The last one venture: Spectacles project.
Spectacles are glasses, that make no more than 30 second videos in a circular format, as the human one. When you wear theese glasses, you can make a video and transfert it in your pc with wi-fi or Bluetooth (for iOS). Brian Bishop, an American radio celeb and New York Times Best Selling author, defined them: “Ridiculously fun” and the sales method Snap Inc adopted, wasn’t less fun: company is using some fridge yellow shaped BOT. They are nomad vending machines, that stay only 24 hours in the same place.
You can hear the next stop from a map in Snapchat official site, or find it in social media contents. Someone says Snap Inc. is working on a low cost drone too, and the efforts to steady the company are noticeable, but it needs a solid long term financial policy.
For all theese features we can study the evolution of Snap Inc. business model, and intentify an evolution from a free multi-sided business model to a more solid earning oriented business model, with a scalable product: Spectaculars.
- First Stage: Free Multi-Sided business model. Snap Inc. started as Whatsapp: with app initially free and advertisers who pay the fees.
- Second Stage: No Free Multi-Sided Business. Snap Inc. try to give more stranght to his business investing in a scalable product. Spectacles and more various services on-line, with fees. IPO it’s a launch, not a solution. If your society enter into public market, it has to guarantee stability financial viability over the time.
Conclusion
Snap Inc. IPO gives the Company an high equity injection. But Snap needs a long term solution that an Initial Public Offering can’t give. It needs regular profits to continue to invest in intensive human capital and to invest into other technology ventures. Snap Inc. need this to gain more users and to compete with Facebook and Instagram expanding projects, that are increasingly similar to Snapchat products.
