Snapchat’s New Test: Grow Like Facebook, Without the Baggage

Under pressure from investors, Snap is making radical changes. Can it emulate Facebook without losing its innovative spirit?

Comments: 19

  1. I don't use the app, and no it doesn't "worry" me that they're unable to compete with Facebook. There's plenty of venture capital available, and these platforms aren't all that difficult to build, so someone else will come along soon, perhaps with a wiser CEO who doesn't fritter away tens of millions of dollars on misguided products. Also, don't forget that Instagram was independent before FB acquired it, so it is possible to compete with FB and succeed.

  2. The issue with SNAP being acquired can be found in the section of their S-1 titled "Anti-Takeover Provisions: "In addition, the authorization of undesignated preferred stock makes it possible for our board of directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to change our control." This is a structure understood as "Poison Pill" stock which means that in the event SNAP are acquired by another entity, they can readily issue whatever quantity of shares necessary to maintain control as an independent subsidiary. Were Facebook to acquire them, that would be a massive loss on Facebook's books, and then SNAP is free to do whatever (as they are now, because of the triclass structure that "will make it more difficult for our existing stockholders, other than Mr. Spiegel and Mr. Murphy, to replace our board of directors as well as for another party to obtain control of us by replacing our board of directors."

  3. That's a great point, but I wasn't suggesting FB acquire Snap, just observing that social media success stories exist beyond the core FB app, and when larger companies feel threatened, they generally open up their checkbooks.

  4. What makes SNAP even less eyecatching, and additionally more worrying, is that their stock multi-class share structure allows the largest percent of their shareholders to assume nearly all equity liability while having exactly zero votes per share. Spiegel and friends have all of the votes, and something like 8% equity liability if I remember the S-1 figures correctly.

  5. From my POV, two issues with Snapchat: 1) the app is too difficult for anyone above 25 to understand. It wasn't until my friend's 21 year old sister taught me how to use it, that I understood how it works. Once you get it, the app is much better than Instagram, which--in my opinion--has become far too commercial. What fun is an app when everything either is an ad, or tries hard to feel like an ad? 2) Was Snap Inc. asleep at the wheel with their IP? Facebook literally copied EVERYTHING Snap did and rolled it out across their main assets--not just Instagram.

  6. Most of that stuff can't be patented, it's just generic user interface stuff. Even if it can be patented, it usually can't be enforced because FB could just change it in small ways to bring its own app in compliance.

  7. How much of this is about the encroachment of the Facebook model of social media, and how much of it is about the decreased economic potential of the "millennial" market? This latter question is pretty important if no one really could use it under the age of 25.

  8. That would make sense if wall street did not regard millennials debt potential as more of a boon than their economic potential.

  9. The thing is that the millennial market is a thoroughly viable one. The issue is that SNAP is ONE thing. It's an app. Sure, it's an advertising company; but it's an app on the front end. Apps are great. They're.. pretty viable. But if I knew anyone that used an app which they had downloaded for longer than three months, I don't remember it. Facebook isn't just an app. Facebook is an app, a website, Instagram, a VR company, an internet development company, an energy development company, and an advertising platform. Alternately, Twitter is an app and an advertising platform. The difference is that it takes 9 TWTR to buy 1 FB. Millennials are fully accessible, but apps aren't the only things that appeal to us.

  10. I may be naive but I don't agree that "the fact that Snap’s future is uncertain should worry you, even if you’ve never used its products." The only reason it feels it needs to morph into Facebook is because it sold its stock at a huge valuation, make claims for huge levels of growth, and now faces pressure from investors. It's not the world that requires it to morph into Facebook. It's because the founders cashed in and made exaggerated claims. What if they hadn't sold? What if they didn't need more than $1 billion dollars? Maybe they could keep Snap the way they and their followers liked it. The world didn't make them change. Their desire for ruling the world and amassing billions made them change.

  11. But it doesn't face pressure from investors. Their stakeholders don't have any say in the company whatsoever. They literally only have to do what they think is going to be the most profitable for them. They fall under Controlled Company Exemption and as such have a completely partial board of directors. The entire company answers to two guys, and they could care less how well the company performs; they paid themselves $800 million bonuses after IPO. They could care less. I think the issue is that they want to appear legitimate while they absolutely are not.

  12. Do not forget about fiduciary duties as a public company. If the founders do not do what's good for shareholders it will have negative consequences. So the pressure is real.

  13. Sixty-three year old grandma here. I have been using SnapChat for three years...almost every day. It's the best way to keep in touch with my GenX, Millennial and younger family members. It's also a fun way to 'chat' on the bus/train with younger people in remote parts of the world. I have met young people who don't have indoor plumbing, but who are thrilled to follow me on SnapChat. I love it.

  14. "If a wildly creative company with an app used by 178 million people every day can still be crushed by Facebook, how is anyone supposed to succeed?" Here's an answer: make money. The world is full of wonderfully beneficial enterprises that cannot turn a profit. Maybe Snapchat is one of them. Last quarter it lost something like $400 million. Why should investors treat it as a success when it loses half a billion dollars in three months? And before we shed a tear for how cruelly wall street has used Snapchat, let's not forget that the market still values it at $15 billion and its founders are rich beyond their wildest dreams.

  15. Oh, how hard it is not to be snarky. But what the heck: MySpace, here we come! Honestly, how many Facebooks can there be? An entire business built on pictures you don’t want your parents to see ... is the kind of business that doesn’t have a long shelf life. Will be interesting to see if a strategic realignment will work, but ... I’d start checking my vesting schedule if I were you, kids.

  16. They have a very poorly thought model, no doubt. And they have no effective way of monitoring ad-based traffic for their advertisers. Additionally, as another said here, there's no brand-loyalty. That is the largest qualm with millennial markets. They're a great demo, but unless you have your hands in the pockets of many enterprises (e.g. Instagram, Oculus VR, Facebook, WhatsApp) for them to jump around to, you can't make money for long off of them. Millennials are tourists, and unless you have plenty of parks, they're not doing you any good.

  17. Why are we supposed to feel empathy for these young tech bro's/Masters of the Universe because a competitor has outwitted them and they may not all become multi-millionaires?

  18. There is no way to monetize this product. The "Freebies" loved it and they will use the next free product so no brand loyalty.

  19. Just make three apps interconnected. Keep the one you have put one on for older users and new one for the hip. Cake and eat it too. Imagine that.