Snapchat, the image messaging service which has exploded in popularity with the 18-35 demographic, underperformed in its initial public offering on the stock market earlier in May. However, if technology-based IPOs have been any indicator in the past, the event doesn’t necessarily mean the company is isn’t worth paying attention to.
Snapchat’s IPO was predicted to be a titan. Snapchat and its parent company Snap, Inc. had been growing in popularity in recent years in a dramatic way. This created a perfect storm of expectations where the Snapchat IPO wasn’t just predicted to be huge – many thought it would be the “one-in-a-lifetime” IPO that they’ve been waiting for since the dawn of social media.
But then, something peculiar happened. Something that actually began in the summer of 2016.
Snapchat Stats, or: The Trouble with Expectations
When you take a look at the following statistics from the last several years of Snapchat’s growth, it’s easy to see why so many people predicted that the company’s IPO would be an absolute monster:
• Snapchat has been enjoying incredible growth for the last several years. In December of 2013, the platform had five million daily active users. Flash forward to December of 2016 and the company had 100 million daily active users.
• Snapchat’s users are also incredibly engaged. Over 54% of them log into the service on a daily basis. A further 32% admitted to using the service between two and five times a week. Ultimately, this means that 87% of Snapchat’s user base opens the app at least twice over the course of a week.
• Snapchat’s users are all about content. Not only do they watch approximately 10 billion videos per day – an increase of more than 350% year-over-year – but they also create over 400 million video snaps and share almost 9,000 photos every second.
• In terms of the always coveted 12 to 24-year-old demographic, Snapchat maintained a 72% adoption rate – making it the most used social media platform among this age bracket, outranking companies like Facebook and Twitter by a significant margin.
Taken together, these stats mean that Snapchat is an incredibly popular, versatile social networking platform that is still growing and that has been particularly receptive among an age bracket expected to spend $1.4 trillion every year by as soon as 2020.
So what happened?
Instagram Stories and the Snapchat IPO
On August 2nd, 2016, Instagram rolled out a feature called “Stories” – a feature so similar to Snapchat’s main offering in nearly every way that many have called it an unabashed clone. It wasn’t just a shot across the bow of Instagram’s major competitor – it very well may have been a coup de grâce hiding in plain sight.
The damage to Snapchat was swift. Average unique viewers per Snapchat Story decreased by roughly 40% across the board. The Snapchat app, which had been solidly positioned in the top three downloads on mobile app platforms worldwide, feel to #11. Even celebrities and influencers saw their Snapchat views drop by about 15 to 30%, according to Tech Crunch.
The most damning statistic of all is that after the launch of Instagram Stories, Snapchat growth slowed a dramatic 82% in the next quarter. By the end of 2016 Snapchat had a daily active user account of 158 million people – just 3.2% growth quarter-over-quarter. Instagram Stories, meanwhile, had 100 million daily active users on its own during the same period. The larger Instagram app is used by about 300 million people on a daily basis.
The Verdict
All of this contributed to an IPO that was… interesting, to say the least. Many have called it a disaster due to reality failing to meet last fall’s wild expectations and from increasing competition on nearly all sides, not just from Instagram but also from competitors like Google. The future of the company is as cloudy as it has been in awhile, which makes long-term forecasting incredibly difficult.
Snapchat may be the “Once and Future King” – or it may soon be exiled to the “Island of Misfit Social Networks” currently inhabited by MySpace and Friendster. All of this remains to be seen.
The Snapchat IPO has also been called a success in spite of less-than-stellar numbers because the company was able to successfully fend off last-minute doom and gloom from industry professionals. Even though it’s not the “sure bet” it was touted as, there are still positives to be found here – and they clearly count for something.
Regardless of what happens to Snapchat’s stock price, it’s clear that the future of the company is one to watch very carefully – particularly if you’re thinking about investing.
Regards,
Ethan Warrick
Editor
Wealth Authority
