Company / division: Snap
We’ve known this was coming for a while, but there are a couple of extra wrinkles here. First up, let’s get the obvious out of the way – yes, this is another example of Facebook copying Snapchat, although at this point it’s also copying itself, specifically with regard to the presentation of Stories within the Facebook app, which is very similar to what it already does on Instagram. The good news is that it’s avoided the heavy-handedness that characterized its launch of the Stories equivalent My Day in Messenger and to a lesser extent the equivalent Status feature in WhatsApp – this feature is more subtle and slots in at the top of the app a la Instagram, which should lead to less of a backlash from users. One of the weirdest new features here, though, is a new direct message feature, which is an odd Google-like doubling up on messaging given the existence of the Messenger app. There are some other unique features, but several of them feel different for difference’s sake rather than being valuable or more appropriate for the Facebook setting than Instagram, and I’d expect at least some of them to make it into Instagram Stories in time. To take a step back, though, this is an entirely logical next step given the success of Instagram Stories: the latter has over 150 million users out of a monthly active user base of 600 million, while Facebook has a total user base three times that size, meaning it could bring the feature to many more people. And of course, in the process it’s likely to further dent Snapchat’s growth, which continues to be one of the biggest question marks over its long-term trajectory.
via The Verge
I’ve changed the headline here to get at what I see as the key takeaway from this data, which is that social media is absorbing other forms of media consumption on phones. As standalone categories, multimedia, news, IM, and so on show up further down the list, but of course social media – by which I suspect we mostly mean Facebook and to a lesser extent Snapchat, Instagram and so on – increasingly includes those things. That’s where that consumption now increasingly happens, rather than in dedicated apps for consuming news, video, and so on. I’ve argued for a while now that Facebook is these days as much a content hub that happens to rely heavily on friends for the content rather than merely a social network, and to me this data confirms that.
The ANA represents 1000 large advertisers including many of the largest companies in the US, so what it says definitely counts for something when it comes to advertising policy. And in this case it’s saying that it wants other big tech companies to submit to outside audits alongside Facebook and Google, who have already committed to do so. Strangely, Instagram is on the list anyway, alongside other independent names like Twitter and Snapchat. There really seems to be increasing pressure from advertisers for transparency and consistency, and this was one of the themes of P&G exec Marc Pritchard’s talk a few weeks back in which he called on the ad industry to do better on several fronts.
The Snapchat as TV thing is getting a little hackneyed, but it works because it’s increasingly true – it appears Snapchat is increasingly prioritizing video over other content in its Discover tab, and perhaps especially original video created for the platform. That could push other content (and its publishers) further down the listing of Stories within Discover, or could potentially demote all non-video content into a different area entirely. That’s not terrible news for those content partners who major in video, but would obviously be much worse for those who focus on articles and the like. My guess is that those already get much less viewership than the video stories given the setting and the audience, but it is going to push Snapchat to become much more video-oriented overall.
In a sense, there’s really nothing new here – the key quote comes from the S-1/A filing from a month ago. The article, though, argues that Snap will make money from higher ARPU over time rather than from user growth. While it clearly won’t be going for user growth in emerging markets for the reasons stated in its S-1/A, I don’t read that as not being focused on user growth – it clearly will be but that focus will be on mature markets, where it still has tons of headroom, at least in theory. It’s worth noting some other things here: Kurt talks about Facebook as the comparator, and it’s clearly the obvious one, but Twitter is another. And whereas Facebook has now reached a nearly $20 ARPU in the US quarterly, Twitter has stagnated at around $6-7 over the past year. Just because Facebook was able to keep growing ARPU seemingly indefinitely, that doesn’t mean Snapchat will be able to. And I’d argue that with such a simple, non-stream-based interface, Snap probably has far fewer places to put ads, meaning its ceiling is likely quite a bit lower than Facebook’s. It’s also worth remembering that Facebook’s ARPU numbers are at least a little misleading – the user number is only for the core Facebook app, whereas the revenue number includes Instagram, WhatsApp, and Messenger too. Lastly, part of rising ARPU at Facebook is price per ad, not just more ads shown, which is a reflection of new demand outstripping new supply, something else that’s not guaranteed with Snapchat. Overall, I’d be very wary of drawing too many conclusions about Snapchat’s potential from Facebook.
This feature has been in testing since September, but is now rolling out globally. As I’ve said previously, Facebook has done much better in cloning Snapchat successfully since it stopped trying to recreate the entire app and focused instead on features, with Instagram Stories being the standout example. It’s now rolling out Stories in various ways in its separate apps, with Messenger second to go global, and the core Facebook app likely coming next. And why not? Though I think it’s a little distasteful to see Facebook copying Snapchat so blatantly, it certainly appears to be working, and taking a feature used by a competitor with 160 million users and making it available to ten times that many seems entirely logical.
Just a quick one here to document yet another “borrowed” feature from Snapchat in Instagram: this time, geostickers. No sponsored stickers yet, but given how hard Facebook is currently pushing to find new ways and places to serve up ads in its various properties, those can’t be far behind. The geostickers are pretty limited for now, but no doubt they’ll also spread in time. This doesn’t feel like one of the most important missing pieces in Instagram’s feature set, but no doubt it’ll help Snapchat converts feel a little more at home once it rolls out more fully.
The attitude reported in this piece is not new at all – the New York Times reported on this a while back, but it’s been part of Snap’s DNA from the beginning: it simply doesn’t engage with “influencers” or creatives who use the platform to promote themselves in the way other platforms do. What’s new in this BuzzFeed piece is that it claims influencers are leaving the platform for others where they’re treated better. Snap’s official comment in the article couldn’t be more blasé – it basically says it cares more about its customers and official media partners than these “creators” – but it can probably afford to be that way. The reality is that these influencers aren’t likely nearly as important on a platform that has lots of official, professionally produced content from brands and media outlets as it is on a user-generated network. Between content from friends and content from these official partners, Snapchat likely has plenty to keep users interested and engaged without having to kowtow to independent creators.
Snap’s shares pop after $3.4 billion IPO – Reuters (Mar 2, 2017)
Snap’s IPO was widely expected to come today, and it ended up being a great debut for the stock, which rose 44% by the time the market closed, though it’s lost a little since and seems to be fairly volatile. As I’ve argued, the IPO itself comes at an extremely risky time for Snap and its investors, because there has been slowing growth but not enough time to see whether that growth will rebound, making future growth uncertain. The pop today wasn’t a surprise – the market has been so hungry for a major tech IPO for such a long time, and Snapchat is such a hot property, that retail investors chasing the next big thing were always going to jump in in a big way. At this point, Snapchat’s growth could still recover and it could go on to become one of the big success stories of the 2010s, or it could become another Twitter – there’s really no way to know at this point.
It’s almost certainly not a coincidence that not one but two rumors about Snap working on additional hardware have sprouted the week of its IPO, both apparently well sourced yet conveniently vague on whether a product will actually ever be launched. This is good hype fodder for an IPO with some serious question marks over it, and yet non-specific enough that the company can afford never to release either of these two products (the Times reports a drone, while TechCrunch discusses a 360 degree camera). None of this is to say that Snap – which now calls itself a camera company and has one piece of camera hardware already in Spectacles – won’t release more camera hardware in future. In fact, I’d say it seems very likely. But when it happens, we’ll see whether that’s actually a bet that ends up moving the needle or just ends up being a novelty as Spectacles seem to have been. I’m still not convinced that Snap will ever be able to make a serious business out of hardware, its marketing genius notwithstanding.
Parents adopting Snapchat as their kids exit – Axios (Mar 1, 2017)
We’ve seen this happen so many times now with social networks that it’s a cliche at this point – as the parents arrive, the kids start leaving. That’s still an exaggeration with Snapchat at this point, and certainly the arrival of the olds isn’t the cause of the departure (technically, slower growth) among youngsters, but a maturing of the base is natural over time as Snapchat already has massive penetration among younger demographics, at least in its biggest markets. These eMarketer numbers, though, still don’t paint a picture of very rapid growth at Snap, which continues to be the biggest worry ahead of this week’s IPO.
Yet another use for Facebook’s very successful cloning of Snapchat’s Stories feature in Instagram, this time coming to WhatsApp. This is also another feature-level attempt to take share from Snapchat, which again seems to be what’s finally working for Facebook, in contrast to the whole-app approach it once favored. In this case, Facebook is ditching the Stories name and instead putting this feature in the Status slot in WhatsApp, but it looks like the format is very much the same.
I always figured Snap would put Spectacles on sale online eventually – its bot-based model was great for creating intrigue and interest early on, but clearly wasn’t great for making the glasses available to everyone who wanted them. Now that the initial excitement has long since worn off, selling whatever remaining inventory online makes sense, though I’d argue they should have started this new phase much earlier, towards the end of last year. The initial hype didn’t seem to last that long, and the New York City store had long since stopped having a regular stream of customers.
Snapchat Parent Snap Inc. Sets Valuation at $19.5 Billion to $22.2 Billion as IPO Approaches – WSJ (Feb 16, 2017)
It’s hard to avoid the sense that this valuation coming in at the low end of the previous target range is a sign of dampening excitement in the Snap IPO following the release of the S-1 and other worrying signs. That’s a sign of a certain amount of humility and realism from the company, which is a good thing. It’s still a massive valuation for a company at Snap’s stage of maturity, and it’s always possible the valuation will come down still further (or go up) following the roadshow, as investors get to kick the tires a little more. I’m more curious than ever what happens when the IPO finally kicks off because – as I wrote the other day – Snap is debuting at a terrible time in its history.
Snapchat is Struggling On Android — The Information (Feb 14, 2017)
I’ve tweaked the headline here to reflect the content of the article: the point here that Snapchat doesn’t work as well on Android as on the iPhone, where it began and where most of its employees and many of its users are. This wasn’t an accident – Snap is open in its S-1 filing about the fact that it has prioritized iPhone until now, and that’s not an unusual strategy for developers pursuing the high end market. However, it works a lot better as a strategy for a news, video, photo filter, or other non-social app than it does for a social app – by definition, social apps need broad reach to create the kinds of network effects that make them successful. It’s not that Snapchat hasn’t had an Android app for a long time – it launched it in October 2012, when it still had a relatively tiny number of users – but that it’s rather neglected the Android app. It explicitly called out some bugs and underperformance as a reason for its lackluster user growth late last year in its IPO filing, but this Information piece argues that it’s not moving fast enough to improve the experience there. And yet it has to be good there if it’s to grow, especially outside the US and major European markets.
via The Information
Yet more ammo for the “Snapchat is TV” crowd, though that feels more and more literal all the time, since Snapchat’s content is more and more actual TV content from actual TV companies, as with A&E in this case. What’s unique here is that the show is both unscripted and not based on an existing show – i.e. it’s original content for Snapchat, though importantly not original content by Snapchat a la Netflix/Amazon/HBO. Snapchat did spend $13.3 million more in 2016 than 2015 on content creation, but in reality that’s about collaborating with existing providers on content rather than creating its own. For now, Snapchat remains a great way for existing TV brands to reconnect with the large portion of its target audience which has abandoned traditional TV.
It’s not just Google — Snap has a $1 billion cloud services deal with Amazon, too – Recode (Feb 9, 2017)
Snap has filed an amended version of its S-1 IPO filing, and it’s added a few extra tidbits here and there. This Recode piece picks up on the most notable: earlier this month, Snap signed a deal with Amazon’s AWS which is worth at least $1 billion over 5 years, for redundant infrastructure (i.e. as a backup to its primary reliance on Google’s Cloud). Unlike the Google commitment, which requires a steady minimum of $400m spent per year, this deal ramps from a minimum of $50m in 2017 to $350m in 2021 (which is probably about how much Snap spent with Google in 2016). That’s a rapid growth rate, and implies that this level of redundancy may be new for Snap, perhaps triggered by investor concerns over its sole reliance on Google. Combined, that’s a minimum $3 billion commitment for just these two infrastructure companies over the next five years, which is about seven times its 2016 revenue – that’s a big commitment and increases the risks associated with slowing growth. Also new in the S-1/A are a couple of paragraphs intended to reassure investors about the multi-class stock structure and the disclosure they will receive with their Class A shares, as well as some expansion on its slowing user growth and the lower engagement levels its Rest of World users exhibit relative to its US and European users.
This is another one of those times where it feels like the Facebook copying Snapchat narrative might have been a little over-applied. It seems as though Snap has hired and/or acquired an engineer and his firm in Switzerland, whose expertise is making it harder for outsiders to reverse engineer code. The Facebook read here implies that Facebook is actually reverse engineering the code rather than simply building equivalent features from scratch. To the extent that this is about preventing copying, it’s far likelier to be a response to smaller outfits cloning Snapchat than Facebook, which has many engineers more than capable of building these features without reverse engineering code.
More evidence that Snapchat is TV for millennials? (As Ben Thompson, Kerry Flynn at Mashable, and today Christopher Mims at the WSJ this morning have each suggested.) Perhaps more interestingly, though Snapchat has been described as trying to win over TV advertising dollars, this is actually a promotion of sorts for a traditional TV show itself, with shorter-form, vertically-oriented videos on Snapchat as a sort of taster. There will actually be ads within this video as well, so this isn’t advertising per se, though its goal is clearly to drive viewership on BBC America here in the US. As with its Google relationship, Snap’s relationship with TV is likely to be complicated, as it both seeks to steal ad dollars from TV while also taking ad dollars (and content) from the TV industry. At any rate, if you haven’t seen Planet Earth II yet, I highly recommend tuning in when it airs – it’s fantastic.
This is interesting additional detail around the Snap IPO filing I covered yesterday (and which I wrote about in depth at Beyond Devices today). Snap recently signed a 5-year deal with Google to use its cloud services to the tune of at least $400m per year, and the companies have worked together on some stuff in the past two, including some projects that never made it to production. But Google was also listed among the handful of competitors Snap specifically cited in its S-1, so this relationship is, as Facebook might say, complicated. That’s particularly the case around search, which is one of the areas where Snap was partnering with Google but eventually pulled out and decided to build its own platform instead.