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Snapchat redefined social media, but can it compete post-IPO?

Matt Kapko | Jan. 31, 2017
Snapchat changed how users communicate by making entertainment the main objective. But with its IPO approaching, the company faces new challenges -- namely generating revenue.

Snap began calling itself a “camera company” last year and released its first hardware product in the form of Spectacles. The $130 dual-purpose sunglasses capture videos for owners to share on Snapchat. The product is in limited supply, but it showcases how Snap is designing complementary devices and pursuing new formats for visual sharing in a mobile environment.

“If [Snap] positions itself as more than a social network, in the style of Facebook, it may be OK,” Sussin says. Despite its rapid growth rate, the company has a limited global presence and a young, largely female user base. More than two-thirds (71 percent) of Snapchat’s users are under 25 years old, 62 percent earn less than $50,000 per year and 70 percent of its users are women, according to analysis by Sprout Social, a social media management company.

Snap falls in line with data targeting norms

As Snap’s initial public offering approaches, the company is taking steps to boost its advertising business by falling in line with industry norms for ad targeting. In September, the company released Snap Audience Match to help marketers target ads to users based on their email addresses and mobile device IDs, and earlier this month Snap inked a deal with Oracle Data Cloud to use offline purchase behavior to target users with more relevant ads and measure their effectiveness in future sales, according to The Wall Street Journal.

The moves stand in contrast to comments made by Snap CEO Evan Spiegel at Cannes Lions in 2015 when he described such practices as “creepy,” according to VentureBeat. During an on-stage interview at the annual advertising conference, Spiegel called targeted ads annoying and insisted the company is not interested in gathering personal user data on the same scale as its competitors. “We care about not being creepy. That’s something that’s really important to us,” he said at the time.

“You know, suddenly things aren’t so creepy when you have an IPO and you need to show revenue,” Traction’s Kleinberg says. While there will be some backlash to these changes, there’s only a small fringe of users who care, he says. Facebook continually probed and added more data targeting before and after its IPO. When Facebook encountered criticism, it apologized and made some changes, but eventually pushed forward again.

“I think Snapchat is going to do the same thing,” Kleinberg says. “There’s only so many marketers who are going to accept broad reach amongst young people… What they’re trying to do is give marketers other reasons to buy.”

 

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