Snapchat has to start delivering if it wants to continue being seen as hot tech.
Yesterday was a rough day for Snap, the parent company of Snapchat. For the third quarter in a row it reported it failed to meet analyst expectations on a number of fronts. User growth was the slowest it’s been since early 2012, with just 4.5 million people joining the messaging service. And the introduction of automated, auction-based advertising is driving prices down, especially when compared to the fixed pricing that is in place when a company works through Snap’s own sales team. To add insult to injury, it admitted that Spectacles, rolled out earlier this year to much fanfare and sold exclusively through pop-up vending machines, were a dud and that it’s cost almost $40 million to store devices that were either never sold or which have had their orders canceled.
In response CEO Evan Spiegel said the company was making a number of adjustments:
First, it’s going to begin opening its wallet for creators who are using the platform to incentivize continued usage and would add more monetization options in the near future. Additional production features may also be forthcoming. That could be helpful since a recent study found influencers were cooling on the platform and going where there’s more money.
Second, it’s going to undertake a redesign effort to make the app easier to understand and use. Details on what that might entail were not offered – and may not yet be decided – but any substantive change runs the risk of being more generally acceptable while alienating the core user base.
Shades of Twitter
If this all seems vaguely reminiscent of the conversations we’ve had around Twitter in the last few years, you’re not wrong. Twitter has struggled for a while to define its unique value proposition and answer the core question of “Now what?” that’s asked by new users. It’s balanced the need to smooth out the on-ramp with not upsetting the power users of the network.
Those efforts have been hit and miss. Changes to the app navigation, the introduction of Moments, the shift to an engagement-driven Timeline, even yesterday’s roll-out of 280-character updates, have been greeted warmly by some and derided by others. Only in this most recent quarter does their story seem to be turning around as daily active user growth, ad revenue and other numbers all begin to solidly move in the right direction.
What’s At Stake
Snap reported Snapchat has 178 million total daily users at the end of last quarter. While it might not be as high as investors and others would hope for, it’s not insubstantial. Even more than the sheer numbers, it’s the app’s popularity among teens and young adults that makes it so popular. 47% of teens told Piper Jaffray it was their favorite app. Almost 60% percent of those who use it are under 25 years old. It’s used these stats to attract the attention of media companies, encouraging them to create original productions as well as buy Sponsored Lenses and other ad products.
Snapchat has also firmly positioned itself as the chief innovator in the social tech industry. The Stories format it introduced years ago has gone on to be copied or mimicked by almost all competitors, sometimes with unintended consequences. Likewise for face filters and other photo manipulation tools. It’s experimented with AR and other boundary-pushing features.
Yes, Snap has to prove it not only has appeal for those over 25 – and that it’s easy to use without needing to bring in a Millennial consultant for assistance – but that it’s viable as a long-term business. Even Silicon Valley will only tolerate so much experimentation, no matter how cool it is, before a company has to produce tangible results.
That reported redesign will be a major test, not just for users’ tolerance for change but for how much investors feel they were sold a bill of goods when the company IPOd back in February, though it’s not as if the numbers were all that great at that point either.
In short, so far Snapchat has been attractive to investors, advertisers and media producers because of the promise of what it could be, not necessarily because of what it is. Eventually, we’re going to have to get to the point where it delivers on that promise.
Chris Thilk is a freelance writer and content strategist who lives in the Chicago suburbs.