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| Snapchat changes specs to look past the iPhone generation | Snapchat changes specs to look past the iPhone generation |
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| Don’t suggest to executives at Snap, parent of the Snapchat app, that they work for a social network, or that they’re in the social media space. “It’s a communications platform, not a social network,” says Claire Valoti, international vice-president of Snap. | Don’t suggest to executives at Snap, parent of the Snapchat app, that they work for a social network, or that they’re in the social media space. “It’s a communications platform, not a social network,” says Claire Valoti, international vice-president of Snap. |
| You might think that an app where you create media – photos with captions and effects – and then send that to a selection of friends and acquaintances (where it self-deletes) sounds like social media. But Snapchat wants to distance itself from rivals such as Facebook, Instagram or Twitter, which this year were the focus of so much negative attention for their effects on democracies, cyberbullying, or invasion of privacy. | You might think that an app where you create media – photos with captions and effects – and then send that to a selection of friends and acquaintances (where it self-deletes) sounds like social media. But Snapchat wants to distance itself from rivals such as Facebook, Instagram or Twitter, which this year were the focus of so much negative attention for their effects on democracies, cyberbullying, or invasion of privacy. |
| For 2019, making that distinction seems to be an important part of the company’s message. But as it looks back on 2018, where it recorded losses of more than $1bn (£790m) on revenues of just $791m in the first three quarters, the clear target is to improve revenues and head towards profitability. It aims to do that in two ways: by getting more users who own smartphones running Google’s Android software; and by delivering more adverts to all its users through “programmatic” advertising bought automatically by ad agencies. | For 2019, making that distinction seems to be an important part of the company’s message. But as it looks back on 2018, where it recorded losses of more than $1bn (£790m) on revenues of just $791m in the first three quarters, the clear target is to improve revenues and head towards profitability. It aims to do that in two ways: by getting more users who own smartphones running Google’s Android software; and by delivering more adverts to all its users through “programmatic” advertising bought automatically by ad agencies. |
| Having created Snapchat in 2011, based on an app idea for “ephemeral messaging” that he had at Stanford University, Evan Spiegel brought Snap to market in March 2017, valued at $33bn. Since then the stock has mostly slid downhill, to a valuation in mid-December of $7.3bn; it has yet to have a profitable quarter. | Having created Snapchat in 2011, based on an app idea for “ephemeral messaging” that he had at Stanford University, Evan Spiegel brought Snap to market in March 2017, valued at $33bn. Since then the stock has mostly slid downhill, to a valuation in mid-December of $7.3bn; it has yet to have a profitable quarter. |
| Snap faces two problems in its struggle for profitability. First, Snapchat doesn’t have enough users to reach critical mass with advertisers. It isn’t quite an essential destination, even for the young demographic that predominantly uses it; they also spend huge amounts of time on YouTube, which has all the heft of Google’s algorithms behind it. Snapchat had 186 million daily active users (DAUs) in the third quarter of 2018. Twitter doesn’t release a DAU figure, but claimed 326 million monthly active users. Facebook, with Instagram, has 1.5 billion DAUs. | Snap faces two problems in its struggle for profitability. First, Snapchat doesn’t have enough users to reach critical mass with advertisers. It isn’t quite an essential destination, even for the young demographic that predominantly uses it; they also spend huge amounts of time on YouTube, which has all the heft of Google’s algorithms behind it. Snapchat had 186 million daily active users (DAUs) in the third quarter of 2018. Twitter doesn’t release a DAU figure, but claimed 326 million monthly active users. Facebook, with Instagram, has 1.5 billion DAUs. |
| The other problem is that Snapchat doesn’t get enough revenue from the users it does have. In the third quarter, advertising on Facebook’s two ad-supported services, Facebook and Instagram, generated $35.39 per user in North America, $11.75 in Europe and $4.29 in the Asia-Pacific region. Even users beyond those three regions generated $2.81 each. Twitter generated $5.19 per US user, though only $1.17 per international user. | The other problem is that Snapchat doesn’t get enough revenue from the users it does have. In the third quarter, advertising on Facebook’s two ad-supported services, Facebook and Instagram, generated $35.39 per user in North America, $11.75 in Europe and $4.29 in the Asia-Pacific region. Even users beyond those three regions generated $2.81 each. Twitter generated $5.19 per US user, though only $1.17 per international user. |
| Snapchat languished at $2.62 in revenue per North American user, and $0.85 for all those beyond; half of Twitter’s figure in the US, and less than a tenth of Facebook’s. | Snapchat languished at $2.62 in revenue per North American user, and $0.85 for all those beyond; half of Twitter’s figure in the US, and less than a tenth of Facebook’s. |
| Yet a cursory examination of Snap’s financials suggests that if it could raise its per-user revenues by 50%, it would become profitable. | Yet a cursory examination of Snap’s financials suggests that if it could raise its per-user revenues by 50%, it would become profitable. |
| The solution is Android. About 15% of people use an Apple iPhone, and the other 85% a phone running Android. The iPhone users tend to be more valuable to advertisers because they are more affluent – but the Android user base can more than make up for it in numbers. There are also proportionally more Android users outside the US (43% of Snapchat’s users are in the US). | The solution is Android. About 15% of people use an Apple iPhone, and the other 85% a phone running Android. The iPhone users tend to be more valuable to advertisers because they are more affluent – but the Android user base can more than make up for it in numbers. There are also proportionally more Android users outside the US (43% of Snapchat’s users are in the US). |
| But Snapchat presently has more users on iPhone than on Android, which stunts its revenue potential. “We have been very vocal about making it better on Android,” Valoti says. | But Snapchat presently has more users on iPhone than on Android, which stunts its revenue potential. “We have been very vocal about making it better on Android,” Valoti says. |
| Why has it done badly on Android? Valoti suggests that the heavy data requirements – sending images and video – are more easily in reach of iPhone owners with better data contracts, but admits that “we need to make the experience [in the app] much better.” If that works, then the programmatic advertising will make it easier to put ads in front of that larger user base. | Why has it done badly on Android? Valoti suggests that the heavy data requirements – sending images and video – are more easily in reach of iPhone owners with better data contracts, but admits that “we need to make the experience [in the app] much better.” If that works, then the programmatic advertising will make it easier to put ads in front of that larger user base. |
| There might be other revenue sources. Snap is also preparing a second version of its “Spectacles” – a goofy pair of glasses that could take 10 seconds of video and share it via the app – after they failed to take off first time around. | There might be other revenue sources. Snap is also preparing a second version of its “Spectacles” – a goofy pair of glasses that could take 10 seconds of video and share it via the app – after they failed to take off first time around. |
| Now it’s looking to come back. “When Evan is asked about where the future is heading, he will talk about computing being layered over the world,” says Valoti. “The camera is the computer, it’s the link with the world. We believe in the future it won’t just be through your smartphone. Spectacles are part of that strategy.” | Now it’s looking to come back. “When Evan is asked about where the future is heading, he will talk about computing being layered over the world,” says Valoti. “The camera is the computer, it’s the link with the world. We believe in the future it won’t just be through your smartphone. Spectacles are part of that strategy.” |
| So will be the measure of success or failure in a year’s time? “Growing the number of Android users,” says Valoti. Android users, it’s over to you. | So will be the measure of success or failure in a year’s time? “Growing the number of Android users,” says Valoti. Android users, it’s over to you. |
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