Will Snapchat Survive?
In today's tech landscape, is a $13 billion market cap too small?
Welcome:
This week I experienced a professional first. I flew out of town Monday morning for an afternoon of meetings, stayed remote that night, had more meetings Tuesday morning, and then flew home.
It was a real whirlwind but I have to say, the value of speaking with a remote team in person while being away from your main office, able to really focus on the task at hand, is valuable. It’s tough to leave the family, even for just one night, but it was great experience.
One Big Trend: The Camera Company
Photo by Thought Catalog on Unsplash
Snapchat has always been interesting to me. When it first debuted it seemed like a niche app created for a very specific purpose. The sell was essentially “send photos that can’t be screenshot and that disappear after you send them.” Hmmm I wonder what you might use such an app for.
But Snap grew quickly, particularly when it launched Stories. Yes, that thing that you see on Facebook Blue, Instagram, and that existed briefly in places like LinkedIn and Twitter actually started on Snapchat. Stories hung around for 24 hours, meaning your friends could click through them at some later time. You didn’t have to send them to people directly, they showed up on a feed.
It was an awesome product. People flocked to Snapchat and it quickly became a trendy alternative to Instagram. If you shared a curated, filtered version of yourself on the Gram, you showed a goofier, less polished version on Snap. I should say that it wasn’t more authentic, necessarily. Snap stories were still thought out and on brand for the social media savants among us. But it was just kind of more fun. And since Stories disappeared after 24 hours instead of living eternally on the grid, you could feel a little more free to post.
But alas, Stories were too good. Instagram copied the product and didn’t even change the name. Once that happened, there was less reason to keep up with both Instagram and Snapchat. Folks who had come for stories and DMs left or used the app much less. While young people still tended to prefer it to Instagram, its potential for growth had been significantly impacted.
Snap hit a ceiling of sorts. It’s still the preferred communication of some younger people, surpassing even iMessage due to its filters, features, and disappearing messages. But it’s unclear how much more the company can grow. For an organization that makes money primarily through advertising, that’s an issue.
The company does do innovative work. Their augmented reality (AR) filters and features are top of the line. I’d highly recommend Kara Swisher’s recent interview with Snap CEO Evan Spiegel, linked below, to hear more about that. They do sell a wearable, glasses that can be used as a camera and to view AR and VR worlds around you. That has a pretty small customer base, but it’s possible it could ramp up. It’s an extremely cool technology with plenty of practical use cases. Snap is also, like everyone at the moment, working with AI to see if they can develop some kind of neat bot friend for you to chat with. I’m less excited about that.
The big question is this: Can a tech company that seems to have reached its ceiling survive as a standalone entity in 2023? Snap has almost 400 million active users worldwide. It has a market cap of $13 billion at the moment. It is by no means a small, insignificant company.
But in a world where companies have trillion dollar valuations, does Snap make more sense as a division of a much larger organization? Apple could easily buy Snap and use its technology to assist with its own AR and wearable ambitions. It could integrate those parts of the company while allowing the app-centric pieces to operate independently. Even hawkish regulators would be likely to allow such a deal to go through, particularly given that Snap is not growing as it once was.
This is a difficult question for me. On one hand, I find it troubling that companies are often expected to grow exponentially and without limits. Wall Street would tell you that no amount of users or profits is too high, and any slow down is seen as failure. Conversely, I believe there is a place for small and medium sized organizations that have a niche and operate well within it. It’s also likely that Spiegel works better as a leader on his own, outside of a giant corporate structure that would surely stifle his instincts in some ways. Given his track record, that would be unfortunate.
And yet…I wonder what could be. I remember those brief few months when it really seemed as though Facebook/Instagram’s social dominance was going to take a significant hit. Could folding Snap into a larger company with incentives to promote it and invest in its innovators and technology help to push it back to the forefront of consciousness? In this instance, could a cash infusion and deeper partnership actually result in meaningful advancement?
Then again, isn’t the story of…uh…Stories a blistering critique of giving tech too much power and the reigning apps too many users? An innovative feature outright copied by a larger company that ultimately meant that the rich got richer. A break in the action that really just led to more of the same.
Why should you care?: Snap is a fascinating story of success, but you’re also left to wonder what could have been. I’m generally skeptical of acquisitions like what might happen here, as I think they’re unnecessary and destroy value more than create it. But maybe with Snap, such a partnership could work.
Recommended Listening:
Snap's Evan Spiegel on AI, AR, and - yes - TikTok
Kara Swisher’s conversation with the Snap CEO. Spiegel is thoughtful and gives good answers. There is definitely some feigned deference to Apple and Google in here, but for the most part he does an excellent job of getting his message across.
Wrestling Fact of the Week:
The biggest music star in the world, Bad Bunny, will be competing in a match this Saturday at WWE Backlash in his home of Puerto Rico. While he is probably the biggest celebrity to ever be involved with WWE, he does not take his role lightly. Bad Bunny is a fan and has spent an extensive amount of time training to ensure he wrestles well. He’s done great in his past few appearances, let’s see what he can deliver this time!
Have a great rest of your week.
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