Snapchat – Threatening Incumbent Social Media and Content Providers with Strong User Empathy

Snapchat threatens incumbent social media and content providers by listening to its young users

Snapchat is a messaging and content sharing platform that has seen a rapid rise of adoption in the highly coveted 13-34 yr old demographic.  The company’s ability to empathize with this demographic and deliver a value proposition based on key insights has threatened to snap up coveted advertising dollars from entrenched social media and content providers such as Facebook and Google.

Value Proposition to Users:

With the proliferation of camera connected mobile devices, pictures are no longer just a way of capturing and storing life moments, but have become a medium of communication.  Snapchat allows users to capture their life in real time and quickly disburse content to a catered list without worry for quality.  Also after witnessing the repercussions that can occur from stored content, social media and messaging users have come to place high value on privacy.  Snapchat’s offering of a curated viewership, and unlike Google or Facebook, the assurance that all content is only temporary, has given it an edge over the competition in privacy.

Snapchat has also created a discover product where users can view curated channels from professional content providers such as ESPN.  With the advent of ubiquitous content creation, users have placed value on high quality content, and Snapchat has delivered this in a quick and seamless manner.  This allows users to immediately consume desired content without having to sift through low quality stuff, a feature that has plagued Google’s Youtube.

Finally, with the proliferation of targeted ad content and user data tracking, users have become weary of the intrusiveness ads have to their experience and the “creepiness” that users can feel from targeted ads.  Due to this, Snapchat has implemented a different strategy from Facebook and Google for ad disbursement.  With no user tracking or targeted ads, Snapchat continues to place privacy first and instead use less intrusive means of advertising that give the user more control over what ads to view.

This product philosophy has led to a level of user growth and engagement that is highly sought after by advertisers.  According to Snapchat, 60% of 13-34 yr old smartphone users use the app, with 100 million daily active users and 3 billion daily video views.

Value Proposition to Advertisers:

Although still preliminary, Snapchat’s ad products have enticed customers to advertise on their platform due to several key features.

SnapChat allows its users to skip ads.  This creates a lot of value for the advertiser and the user because it allows users to skip ads that do not interest them, and the advertiser only pays for users that interact with the ad for a determined period of time.  This reassures the customer that they are paying for actual views from users that have interest in the product.

Since Snapchat is solely mobile and revolves around full screen photo and video consumption, it offers advertisers the ability to show full screen advertisements.  As opposed to competitor Facebook that generally shows horizontal video as part of a newsfeed, Snapchat pushes vertical video formats to its customers, quoting that such content is completed by Snapchat users at nine times the rate of horizontally produced videos.

The value that Snapchat offers its users has given it a leg up over Facebook and Google in the highly sought after youth demographic.  While constantly assuring its users of privacy, Snapchat’s determination to provide customers with high ROI advertisements has led it to an estimated $50 million in revenue this year after just one year of ads. If Snapchat continues to show a deep understanding of its users, and improves its advertising products to help customers reach their desired audience, Snapchat can continue its rapid growth in its very competitive space and prove its $19 billion valuation.

 

Previous:

Not so Frozen in Time – National Geographic

Next:

Blockbuster – From Blockbuster to Bomb: An Industry Leader’s Stunning Failure

Student comments on Snapchat – Threatening Incumbent Social Media and Content Providers with Strong User Empathy

  1. One of the things I like most about Snapchat is that, among digital modes of communication, it most closely mirrors how people communicate in person. When we speak out loud to one another, our communication is ephemeral in the same way messages sent using Snapchat are. As more and more of our communication happens digitally, communicating entirely through non-emphemeral channels feels as strange as committing to publish every word we ever speak.

    As important as I believe ephemeral messaging will become, it feels like it could become a necessary feature across most digital messaging platforms, rather than being confined to a separate application altogether. If we believe this is possible, the content discovery side of Snapchat’s user value proposition that you outline takes on even greater importance.

  2. If Snapchat does not track users and does not have targeted ads, does that mean its makes less money off of each Ad compared to Facebook and Google? Also, from my experience, users have to selectively chose to watch advertisements, they don’t just turn on and users have to choose to shut them off. I’m curious how many users actually are enticed enough to choose to watch and advertisement, and which ones are chosen the most.

  3. What’s to stop Facebook or Google from moving to this exact model as well? And if they did move to it, wouldn’t they likely be better at it due to their size and existing advertiser relationships. While Snapchat will continue to have the coveted youth demographic, it seems that a lot of their popularity is predicated on the illusion of privacy that it provides. If that rather tenuous illusion is shattered in some way (which is not that hard to imagine given users can screenshot the posts of others), it may erode much of its fanbase and subsequently, its high valuation.

  4. I tend to agree with CC24 that Snapchat could easily be eclipsed by a copy cat product from the likes of Facebook or Google. What Snapchat has right now is a strong brand, but that is really it. There is nothing to stop a competitor moving into this space and trying to win over young users that are new to social media. In this era, the popularity of social media apps like Snapchat is unpredictable, and it is difficult to say with certainty that in two years (or five, 10, 15…) Snapchat will still be widely used. It could just be another fad. Will that 13-14 year old demographic continue to use Snapchat into adulthood? This space changes fast, and Snapchat seems particularly vulnerable.

  5. Really like the market/offering/value creation thoughts here.

    Another piece of Snapchat’s operating model that often goes unnoticed is the dramatically reduced server/tech costs that the company enjoys as a result of its ephemeral offering. Rather than storing billions of photos and videos and messages (like Facebook does), Snapchat can just store metadata (high level, small size data bits about users). This means they need fewer servers to facilitate the same amount of interaction and serve the same size user base. This lowers the hurdle to reach profitability (if and when they make substantial revenues).

    Still, they have to avoid falling into the trap that Baker S. outlines above, wherein ephemeral messaging happens everywhere and Snapchat’s loses share of its users’ eyeballs. Having low costs doesn’t solve the problem of having no revenues.

  6. Great outline of Snapchat’s value proposition to consumers and how that makes them attractive to advertisers as well. I disagree with the comments above that a competitor could come in and copy their strategy, however. What Snapchat has are the users (exactly as the author points out), and the young users at that. Teens do not use Facebook as much as Snapchat, and are not as engaged when they do. Messaging apps have strong network effects – once you’re on it, and all your friends are on it, and you are all using it every day, often multiple times per day, switching costs are very high. When Google launched Google +, it was arguably a “better” social media site than Facebook, but we all know how well that went. Even if a competitor copied Snapchat’s UX, it would be extremely difficult to get users to switch. This is the key to Snapchat’s $16B valuation – users are sticky and eyeballs are valuable.

Leave a comment