In the Prologue to the IPO We Ask: What is Snapchat?

Makovsky

Snapchat’s recent $25-billion-dollar IPO filing, coupled with the launch of Spectacles, their $130 dollar glasses with built-in camera, begets the question: What is Snapchat anyway? Is it a social media platform? Is it an app? Is it a product? Or is it a media company?

Like many other businesses forged from successful apps, Snapchat is both an app and a business.  Similar to game-changing social platforms Facebook and Twitter, Snapchat has been able to both scale up and gain widespread appeal among a younger generation. So much so, that Gen-Z (11-16) has eschewed Facebook and Twitter, preferring Snapchat instead. As a result, it’s not a stretch to classify Snapchat as an app, a business, and a social platform as well.

Like many social platforms that have evolved from merely facilitating interaction and engagement between users and brands, Snapchat has also become a platform for publishers and content discovery. For example, its core Discover feature, which allows users to easily search for and engage with content from brands they love the most, has also become a means for brand publishers to take advantage of the mobile form factor, ensuring their target is actively engaged. This is in large part due to the “quirky” mobile user interface that prompts users to hold, swipe and drag to engage with different pieces of content in the same story. A clear benefit for brands as attention is virtually guaranteed, as opposed to more passive content consumption that occurs on YouTube or television.

What was initially viewed (by older generations) as an example of how not to succeed in user interface (UI) design, Snapchat is now viewed as ingenious. Because of it’s UI, Snapchat is perfectly suited to hold the often ephemeral attention span of its core audience, something most, if not all, of its competitors are trying to replicate.

Considering the almost unprecedented level of success Snapchat has achieved as a social media platform, app and media company, why risk delivering a tangible product like Spectacles that could so easily distract from the formula it has already perfected? The answer is diversification and the desire to prove itself a serious and sustainable business.

What social media platforms that also double as apps have in common is a key metric called average daily users (ADU). When Wall Street puts a valuation on app businesses, ADU becomes a key metric on which to base valuation. The challenge for Snapchat and its investors, is that even as Snapchat’s ADU is increasing, (ADU are now up to 175 million which is more than Twitter) its core user base is getting older. The same thing happened to Facebook, a platform that was about “fun” at first – inside jokes, creeping on high school crushes, random memes – but has now become more focused on political rhetoric, self-promotion and aggrandizement, and an endless stream of brand marketing.

Snapchat’s users, like Facebook’s, will eventually grow up. And when they do, they too will likely outgrow the puppy-dog noses, bug-eye faces, and rainbow-barfing filters Snapchat has become renowned for. Snapchat even changed its name recently to Snap as the master brand, no doubt to allow for diversification but also, likely, to sound more mature. For these reasons it is not surprising that Snap wants to expand its offering to include technology, products and potentially a suite of services that will grow with its user base. For now, Snap remains the app / business / social platform du jour. But only time will tell whether or not its technology will succeed, or if it can sustain the kind of momentum that its now more “mature” competitors have prospered from over the last decade.