Snapchat is the next Twitter
Snapchat goes to the stock market and is worth billions of dollars, but many things point to a debacle. This has several reasons. It is not just the numbers that provide a gruesome factual situation.
The data that people produced in the past tend to stay longer than the ones produced nowadays. You take a photo or video, share it, and expect it to disappear. This is the business model of Snapchat. Besides, the company from Los Angeles is so young that Facebook and Twitter look pretty old.
For now, Snapchat founder Evan Spiegel wants to turn the big wheel and he wants to go public. And there are, in short, two ways the thing can go out. Perhaps Spiegel will become a star like Mark Zuckerberg, makes billions, rises with his company in the highest league of technology companies and creates the next global mega-network. At the start, it looks good: the stock exchange is about 3.4 billion dollars which surprisingly a lot of money. The shares of Snap are issued at a unit price of 17 dollars, as the company announced on Wednesday. Actually, only 14 to 16 dollars were targeted. Now, Snap is valued at $ 24 billion – the highest amount in the technology industry since the 2012. The proceeds from the IPO should be used for business purchases, among other things.
Maybe Spiegel will also stumble as Biz Stone and Jack Dorsey, the founders of Twitter. A world without the Twitter service is hardly imaginable. Millions of people write and read the short news, America’s President Donald Trump reigns with them, but only money can not be earned. Twitter is exciting and is useful, but financially, the idea failed. So where does the company will go in the stock exchange? in the direction of Facebook or in the Twitter direction?
Much suggests that the young company, known for the smartphone application Snapchat, will be a debacle. That it does not make profits, but suffers from perpetual moneys like Twitter. The reason is that user numbers are no longer rising, but stagnating.
Twitter is still deficit today
Facebook had surpassed all expectations a few weeks ago when it presented the figures for the past quarter. Sales: up 51 percent. Profit: more than doubled. Number of users: increased by 70 million. This means that 1.86 billion people around the world are active on Facebook. With Twitter, only 300 million people are using the service every day. The influence of the network is likely to be greater than this figure suggests. After all, politicians, business leaders, experts and stars prefer Twitter to make announcements. Nevertheless, in the recent years, Twitter has accumulated a loss of more than a billion dollars, mainly because the users hardly notice the advertising that the service plays out. Twitter had already been deficit during its stock market trip three years ago – and it is still today.
The advertising business runs better than on Twitter
Evan Spiegel’s company is similar. Its an app which allows young people to send photos and videos that are deleted after a short time, but hardly gains new users. Snap Inc. makes more loss than sales. After all, the company is growing rapidly, similar to Facebook in its early years. The revenue generated by Snapchat per user has tripled in the fourth quarter of 2016.
Last year, the start-up totaled more than 350 million dollars in sales, 2017 is to be a billion. The money is generated with advertising – apparently it works better than with Twitter. Snapchat surrounds a huge hype – but can an economic success story be created? Other Internet surfers have become indispensable. Facebook as a universal network that keeps people in touch. Airbnb for travelers who do not want to stay in hotels. The Uber is for everyone who does not want to take a taxi. On Snapchat, people are just sending disposable pictures to each other. How economically sustainable can this idea be?
When Evan Spiegel and Robert Murphy started their app five years ago, Facebook and Twitter had long since mutated from start-ups to giants. And the concept of the app with the spirit in the logo seemed initially unconvincing. What the hell should be so great on self-extinguishing news? But young people loved it. Meanwhile, 158 million people use Snapchat every day. Well, this is a joke compared to Facebook’s user numbers, and even about half of Twitter users. But the Snapchat founders also have a lot in front: “I’m not a big manager. But I’m trying to be a great leader, “says Evan Spiegel. He wants to be big with the billions from the stock exchanges.
Young users are highly attractive to companies
However, this is quite a risk. Because potential investors and advertisers often wonder whether a good deal is to be made with alienated pictures and videos, which usually disappear after 24 hours. However, the fleeting spirit has a tremendous advantage, which could make it quite attractive for its partners. Anyone who wants to promote Snapchat can integrate its messages directly into the users’ snaps. So you can not get any better at your target group. And this group, which snuggles at Snapchat, is highly attractive for companies that want to advertise.
Who doubts that Snapchat can also be a success model on the stock market, should simply ask Facebook what you think of its colleagues in Los Angeles. Namely a lot. Facebook CEO Mark Zuckerberg had recognized early on which potential could be theoretically stuck in the ghost app. He wanted to purchase Snapchat like he did with Instagram or Whatsapp. Few millions of dollars were offered Zuckerberg, but it was declined by the company. He wants to become a “great evan”, one who is bigger and heavier than three billion dollars.
An “unsocial social network”?
But since 2013, the situation has changed a lot. And not necessarily for the good for mirrors. On the one hand, on-demand business models are no longer as good as it was some years ago. Part of the player is deep in the red numbers. And the long-term interest in Twitter has clearly clouded the euphoria of investors. You can not see the big story in the IT start-ups automatically. And then there is the counterattack of Facebook. Zuckerberg has installed the disappearing pictures to the Instagram against Snapchat and those stories became more successful than the ones on the Snapchat. In other words, Zuckerberg can be quite persistent if he wants to clear out competitors.
So now Evan’s mirror is on the move. Perhaps he would have to explain a little more about what he intends to do with Snapchat over the next few years. What is his vision for the app? But there can be a great silence. The only time you can catch a glimpse of him at work is when he is chauffeured into the company with his SUV, a former employee reports to the Wall Street Journal.
Information about the company and the strategy is only available for small groups of selected employees. This creates no dreams for investors, but distrust. Snapchat is an “unsocial social network,” jokes the Wall Street Journal.