Snapchat, once revered as a dominating force in the social media space, has been a downfall in the past year. A decline in users and plummeting stock prices have challenged Snap Inc since CEO Evan Spiegel took the company public in March. Snap Inc. reported a net loss of $443 million this past quarter, nearly 3x more than the $115.9 million it lost last year. With concerns from Wall Street and articles popping up everywhere on the failure of Snapchat, it has us all wondering: what exactly went wrong?
Snap Inc. earned $181.7 million in their second quarter, earning more than the first quarter at $149.6 million. Although this may seem like good news, their earnings were lower than Wall Street analysts expected. Snapchat’s daily active users are currently at 173 million, increasing by 7 million in the first quarter and 8 million in the second. While the users are continuing to grow, the overall growth rate is slowly declining.These active users are highly engaged and send an average of 20 snaps per day.
This slowed growth could be a predictor of what is coming in the third quarter for Snap Inc. There are many speculations of what is leading Snapchat to this decline. Is Instagram Stories to blame for the slump in stock? Is the lack of analytics scaring away advertisers and brand content publishers? Let’s dive in deeper to find exactly where Snapchat went wrong.
Expensive Ad Buys, Few Returns
Ad buyers have not been happy with the steep premium prices of ads on Snapchat. Snapchat has offered short-form series episodes that TV networks such as E!, ESPN, and Discovery have taken advantage of. Snapchat Shows partners have reportedly paid $100,000 – $300,000 for a slot. Time Warner will pay Snapchat $100 million over the next two years for the original shows and ads. Views of these episodes have ranged from 7 to 11 million views per episode. Many advertisers have also questioned whether those views are legit or if the viewer simply clicked through without paying attention
In a report by Hanapin Marketing, 164 brand marketers were surveyed to see what percentage of their ad spend was going to which social media platform for the next 12 months. Facebook was by far the most popular platform for ad dollars with 93 percent of the market saying they will be spending money on ads. Coming in second was Instagram, followed by LinkedIn and Twitter. Only 19 percent of marketers said they will be using their ad budget on Snapchat. With many advertisers decreasing their ad budgets for Snapchat or avoiding it completely, it’s no wonder Snap Inc. has suffered.
Facebook Launched ‘Stories’ on Instagram
Probably the most obvious reason for the decline of Snapchat has been the strikingly similar “stories” feature on both Facebook and Instagram. Facebook Memories and Instagram Stories have caught the attention of many and sprouted a challenge for Snapchat.
Facebook and Instagram have not only done better at getting marketers to place ads on their platforms, but have also taken many of Snap’s users. Instagram stories have over 250 million daily active users, beating Snap’s 173 million. TechCrunch reported a 15 – 40 percent drop of views in Snapchat stories since Instagram stories were released last August. Instagram recently claimed over 50 percent of businesses have posted a Story in the last month. L2 recently reported that brands are posting on Instagram twice as often as on Snapchat.
Now that every platform has a stories feature (yes, even Skype), the 10-second expiring clip with fun filters and stickers is no longer a niche market.
Is The Platform Too Complicated?
From the beginning, Snapchat has gotten complaints from brand publishers about the difficulty of the platform. The “short lifecycle” of content on Snapchat doesn’t make it easy for brands to increase engagements and build a following. Snapchat being only accessible on the mobile app hinders brands and advertisers. There are simply too many restrictions with using the platform and unexplained updates. Snapchat has also not been adaptable for influencer marketing and has made it very difficult for influencers to monetize their networks.
Many brands use cross-promoting on other social media networks to drive traffic to their Snapchat. This does not allow Snapchat to stand alone and thus needs the help of Snapchat’s competitors for brands to be successful.
Snapchat has acquired multiple companies in the last year. Snap Inc. purchased Zenly in May for $213 million to gain access to location data for their Snap Maps feature. The maps features sparked controversy with many due to privacy concerns. While Snapchat claimed the default mode does not show a user’s location unless they change the setting, many have said their account was showing their location without their permission. This feature, originally meant for fun gatherings of friends, has created another challenge for Snap Inc.
Will Snapchat Survive?
The quickly changing landscape of today’s social media industry takes in one platform and spits out another. Snap Inc. has had a difficult road and an even more difficult road ahead if they want to compete with Facebook and Instagram. In the end, Snapchat will survive but may need to get used to being in second place.
Whatever the exact reason is for Snapchat’s decline, they need to “snap” out of it if they want to succeed.