Snapchat is losing a ton of money, what does this mean?

Ross Johnson's picture
Instructor
2/17/2017
New Media

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Snapchat has filed paperwork for its initial public offering (IPO) and is seeking $3 billion dollars, giving them a value between $20 - $25 billion.

But not all is sun and rainbows in paradise, apparently Snapchat lost $514.6 million in 2016. This is stark contrast to Facebook which already had a billion dollars in profit when they when public.

What do you think this means for Snapchat? Is it doomed to be acquired by a more profitable company? Will they need to attract a wider, more profitable audience? Change their model to attract more advertisers?

Comments & Feedback

Student

I think snapchat will continue to lose money as launching an IPO was not a good idea for them. They are now having too many advertisments and changing their company. 

Student

I think Sanpchat should develop more creative functions or new style forms to attract a wider audiece. People like new things, if Snapchat can research what audiences need and attrative. It would be a chance to the company. And also I think Snapchat can keep some original model, and at the same time they can develop more creative model to attract more advertisers as well. 

Student

Since Facebook has implemented stories to its platform, a variety of memes have been created poking fun at social platforms for adding a "story" feature. My personal favorite memes are the "Excel 2017 will have stories" and "D2L will now have stories". I think this shows how creative social media users/brands can be in response to an event, pop culture or current trend.

Student

I have tried snapchat and do not use it for a while of time. I think it should be add more function in the APP make people using it and addicated with it.

Student

I think that when instagram introduced stories and dming people is when snapchat really lost some of their customers. I think that snapchat has to come up with a new idea something that no other social media outlet has. Something that makes them stand out from the rest. I don't think that it will ever go out of business or not be a thing because it is becoming peoples main form of communication. There is so many times where I will message someone on snapchat vs. texting them because somehow it is inprinted in my brain and many others that it is the easier way to communicate. I think that snapchat introduced a new way of communicating and I don't see it disappering anytime soon. 

Student

I do blieve the Snapchat should develop more fun function because this is not popular like Facebook. People not rely on the Snapchat, one they have another fun app they will delect this. So I think Snapchat should develp more fun function.

Student

Snapchat is currently evolving in all the best ways. I would consider Snapchat to be entertaining and informative but not fun. It has many snap stories of fashion, sports, and all other forms of entertainment. In addition, it includes cool snap filters that everyone enjoys. Honestly, I think that Snapchat is doing well for itself. The more filters, the more entertaining it becomes!

Student

Good call Ross. Want to handle my portfolio? Snapchat opens at $24, got their $3 Billion and valued at $25 billion. Any other stock insights Nostradamus ?!

Student

I think it's becasue SnapChat doesn't have too many users, and because it is not as popular as Facebook is. SnapChat need to attract more users for its App so the advertisers would like to put ads on SnapChat because they want their ads to achieve more people.

Advertisers they prefer to Facebook because it is the biggest socila media. There is a big number of users can achieve the advertisers' requirement. Maybe SnapChat need to absorb more users. For example, I don't post on SnapChat becasue my most firends don't use it. We use Facebook, Instagram and WeChat which is the biggest and most popular social media in China. So I think SnapChat 

Student

I think snapchat would be hard to profit because they only target in teens and young adults. It might be over for snapchat. Snapchat has similar features for Facebook and Instagram. It is a risk to be bought by other companies. I think snapchat should attract a wider audience. If they change the model about platform to make it more popular and people would like to invest them.

Student

I think that this leaves Snapchat in a undesirable position. It leaves Snapchat looking weak where investors can low ball them into offers that might not meet their expectations. Snapchat does offer a platform that is used my most millennials, which can be appealing to advertisers. With the advancement of stories, sponsored content, and snapchat spectales, I can only see the stock going up. With Facebook and Instagram doubling down on live content, Snapchat might need to enhance the experience to make the users feel like they are living in the moment. I think attracting to the millennial market will still be worth it for snapchat though becaues they are the influencers of what will be popular, but that's just my two-cents.

Student

I think Snapchat still have chance to make profit, even though it lost $514.6 million in 2016, this app still has value. First of all, it is really an interesting app. It is free for people to download and use. Also, it has many interesting function for selfie and record video. The category of Snapchat is more likely Instagram, but it is a new exploitation for many user. I think it can join more connection with many predecessor like Facebook, Twitter. Also it needs to add more advertising for broad its popularity. Then, it can not only focus on American market. It also need some international market. If the app becomes more famous, the advertiser will more willing to invest it. 

 

Student

Since technology and creative are easiest things to be stole in the world, many of the other campanies in this industry can modify or copy the functions in snapchat. It is losing its special advantage now (Facebook already has similar function with snapchat now). I believe snapchat may need to do some changes for its business model. It may also need to wider its customer range for a broader market. 

Student

I believe snap chat may be going through a rough batch right now but there are ways for them to over come this. Snap chat is an amazing company and I believe if they start charging firbthing s gebu can make sonmuch more money. I believe if they get more sponsors there is no telling where snapchat future can be. 

Student

Snapchat is not doomed to be acquired by a highly profitable company. However, before this can happen, Snapchat needs to make changes regarding their audience. Snapchat is used among a younger generation, and not many adults actively engage in Snapchat. This being said, Snapchat will need to focus on expanding their target audience and reach a larger target audience like Facebook. Right now Snapchat is limited due to their small target audience who aren't as profitable as some older generations. To become more successful, broadening their target audience could help give them more opportunites with advertisers.

Student

Knowing that Snapchat does not have a lot of advertisements it does not surprise me that they have lost that much money. It is not a lot of space to do advertisement but inbetween stories or with the sponsored filters, in which they usually just do one. It seems that being acquired by a more profitable company would be the most logically thing to do so they could earn more revenue. I do not think that they need to widen their audiences because millennials are a profitable. We spend alot of time and money on technology as well as being one of the largest markets. With their usability being so high i think they could market to advertister to make more money. Also they have determined what their audience user needs but the real question is how can they utilize it to become more profitable in the long run without selling.

Student

I definitely beleive that if snapchat doesn't take care of their financial problems that a more profitable company will acquire it. I think that Facebook has the power to buy snapchat if they really wanted to but snapchat seems to be coming up with new innovations everyday that keeps the audience amazed every time. Its a shame to hear that they aren't doing well financially since they are big on advertisers as they have a whole section dedicated to articles and stories, I would imagine a spot for one of those would cost a fortune especially if your are trying to be in the front of the page so more people can view that story or headline. 

Student

The ads on snapchat are very easy to avoid, so I can't imagine a company is willing to pay that much money to have them. 

Though the stories put on there by companies are much more interesting. The focus should obviously be there. Though, finding a way to make that more desirable feeling like it's the responsibility of the company, and not snapchat itself; so there again I can't imagine a company wanting to spend too much money.

There have been some advancements in interactive ads and I think snapchat could be a place where doing something like that could be fun and lucrative for them.

 

There was also talk of the snapchat glasses, and while I’m not sure about those specifically I do think their little ghost icon (especially when combined with one’s own photo) is really cute, and could be used to market merchandise for them as a another way for them to make money.

Student

It might be over for snapchat. With Facebook Live and Instagram having similar features, Snapchat is in danger of being bought out by other companies. To continue to thrive, Instagram needs to add new and unique features. 

Student

I dont believe snapchat is worth that much anymore. ALthough they had a unique selling point when they first started, slowly more apps like instagram and facebook are starting to adopt similar features. I think that once people realize that snapchat is loosing its market share, a new app will come out and take out snapchat. Also since they are adding so many things to snapchat, it really takes away from the user experience since the app itself takes a long time to load and glitches a lot of the time, atleast it does on my Iphone 5. Yes i believe snapchat is doomed to be aquired by a more profitable company. As of now advertsiers dont like to use snapchat because their buying model is annoying and not very business friendly, also the rates are not standardized which is also a negative for snapchat. If they dont do something soon someone else will come along and standardize rates for them.

Student

This does not surprise me because Snapchat doesn’t currently have very many advertisements on their app. I have noticed some ads that pop up in between different people stories but not too much of it. I think Snapchat is going to have to change something in order to not lose money again this year. I don’t think they need to attract a wider audience but I think that maybe they could focus on getting advertising based on locations. I think more local ads would work better rather than everyone getting the same ads across the world. Snapchat already uses your location while using the app so I think local restaurant ads would work great. Millennials are a huge part of Snapchat’s target audience and are always looking for nearby food deals. 

Student

I think snapchat would be hard to profit from because they are only aiming their target at teens, and young adults. I think in order for Snapchat to be bought by a larger company than they need to appeal to a larger audience. They will absolutely need to attract a wider, more profitable audience. I think since snapchat changes so much that they can afford to change their model to attract more advertisers. 

Student

I think Snapchat as a whole would be a hard app to profit from. Although it is a popular social media platform for young adults today, there is little room for ads. I have noticed in these past few months snapchat has been introducing small ad slots into peoples "stories". I do believe people will begin to become annoyed with this feature, as I already am. Snapchat obviously needs to make more revenue through the app and including ads is their way of doing, although I don't know how their audience will react if they fill the app with ads. To be honest, I think snapchat will fade out in the next few years do to this. 

Student

I think Snapchat lost so much money because it seems to be a very hard social media to profit from. Facebook, for instance, is a very broad and user friendly for all types of people. Snapchat is a very "millenial" based outlet and could be hard to profit from because of the nature of its function. I think Snapchat is still on a hot streak right now, but will not do well money-wise. Maybe it will require more people to advertise to get some profit back?

I also think it's very possible for it be bought out, probably by Facebook, actually. They seem to be acquiring a lot of popular social media sites. I wouldn't be surprised (now that they are public) if they do change things about their platform to make it more popular across the board and people will want to invest in it.

Student

I believe that snapchat will need to change things so they can attract a more wider audience. I personally love snapchat, but snapchat only brings in tweens, teens and young adults. Over the years snapchat has updated many things to make it more fun and usable. However, it isn't doing as well as other social media sites. For example, Instagram and Facebook have updated their sites so it more usable for all age groups. Snapchat needs to go back to the drawing board and come up with a new model to attract more advertisers. If not, I am afraid Snapchat will disappear just like Vine did. 

Student

Unfortunately I don't have any doubt that Snapchat is struggling. Just like every other college student out there I have all the necessary apps on my phone - Facebook, Instagram, Snapchat, Linkedin, etc. As someone who doesn't like change, and doesn't often keep their apps up-to-date, it's amazing to see the changes that these social media sites go through after some time.

Just the other day I downloaded the most recent update of Instagram, I couldn't believe how different the app looked, as well as the usability. The app now gives users the cabability to post "live" stories along with their photo posts. I think this is going to be a tremendous threat to Snapchat, and could even be part of the profit loss. 

Because the idea of a live feed is so similar on these two apps, I think Instagram is on the right track - if they can allow their users to not only post, but stream live all in one place, what need would people have to go post the same thing in Snapchat.

If Snapchat doesn't start aiming towards a different, wider audience, I think they're going to have a difficult time competing. With Snapchat having a very similar audience as Instagram, its going to be hard to compete with Instagram's updates. Unless they aim their app to another direction than just "social media" I think they're going to continue to lose users. 

Student

Snapchat is branded for younger users and that is a definitely barrier to attract older users like me. It is good to have a targeted market but people like me wouldn't consider Snapchat at all. As one of the class reading indicates facebook is attracting much older users now and that is good for facebook. Also, younger users do not have buying power. No offense for college kids but many of them are still under the parent umbrella. If they don't have buying power who would invest? 

Student

For Snapchat, it is bad situation. Snapchat should more force on how to social media advertising in the best way. Trying to get some international marketing, most users are from US not other country. Also I didn’t see any ads when I using the Snapchat. Snapchat is most popular app for young people, Snapchat should make this app more convenience, so users number will increase.  

Student

 I believe Snapchat will need to attract a wider, more profitable audience. As of now, most Snapchat users are children, teenagers, and young adults who simply do not have the monetary funds to invest in Snapchat. This type of audience uses Snapchat for the trendy, entertaining side of things (not much investment) but in order for Snapchat to truly earn its desired profits, the company would have to adjust their model to accommodate a larger more mature audience. The brand really needs to go back to the drawing board and brainstorm on how they can really bring in advertisers that can sell their brand to the older, more financially sound. Only by doing this will revenue spike for Snapchat.

Student

This could become a problem for Snapchat if their revenue continues to not grow at a greater rate than their expenses. They will not be able to achieve and maintain profitability. They will need to attract a wider audience in order to become more profitable. Their current target audience is millenials, and they need to expand to older people. They could also change ther model to attract more advertisers to increase revenue, but needs to be careful so it does not lead to decrease in users due to advertising overload. Snapchat might be best off if they are accquired by a more profitable social media company such as Facebook. It will be interesting to follow Snapchat when they go public later this year.

 

Student

Common thought would believe that this is bad for Snapchat, and ideally it could be. I believe that this will force Snapchat to make adjustments to its app in order to start making a profit again. I think that Snapchat will be able to do this. I don't beleive that Snapchat will be acquired by a bigger company. They will need to increase there target market by adding more applications and uses to make it more of a multi-use app than just a picture/video sending app. In order to succeed they will need to revamp the entire app.

Student

This situation is bad for Snapchat. Snapchat must thinks up some ways to improve, even change the way they usually did. Comparing to Facebook and Twitter, Snapchat is lack of functions. For example, we can only send photoes to our friends, but we can not share things like we did in facebook. That's the shortage of Snapchat. Also, using more advertisements in the app is not a wise decision since users will be annoyed and stop using. If Snapchat really want to change the situation they faced now, they need to think the way to change. 

Student

I think it is more than just a fad.  I overheard my roommate say "I'll snapchat you, text messaging is so old school!" Snapchat is more interactive than the simple text message, you can send videos, different filters, watch the news, and more. I believe Snapchat attracts a large audience, teens, young adults, and even thirty-somethings...I've watched them use the app while stuck in the Atlanta airport.  Snapchat has increased the amount of advertisements, it seems to be that after watching 5 "My stories", an ad pops up.  I am not sure if they are targeted viewers, but each ad is about 10 seconds long.  So, what if a profitable company comes out and buys Snapchat? Facebook bought Instagram and it's thriving. 

Student

In my honest opinion, I dont find this surprising at all. Although snapchat is a widly used app by millenals, there are many other apps that bring more value. I personally use snapchat more than I use some of my other social media. I think  it is a little more personal because you can share what you are doing with your friends the second you are doing it. When instagram introduced the "story" of thier platform I think is when it really took a turn for Snapchat. Instagram is infamous for taking ideas from other social media platforms and using it for themselves. For example, when Vine was popular they took the idea of adding videos to instagram and vine almost vanished instantly. I believe that because snapchat is unlike any other social media source, it has the chance to bounce back and make thier money back. It really comes down to whether or not they can change a few things and gain from it. 

Student

I think this means Snapchat is failing in the market. In my opinion, the concept of saving memories is miss tarketing the market. People can save their memories without Snapchat easily. Even, there are people who don't want their pictures saved in the Snapchat sever. Furthermore, it was unique when Snapchat first came out; the concept of taking pictures daily and send it to friends or family. But, it is not unique anymore. There are other apps that are more attractive or favorable to users that do almost same thing as Snapchat. I think they should develope more to regain their customers. In order to develope, they need more money. Therfore, they need to be aquired to other company. 

 

Student

I’m honestly not surprised that Snapchat lost that amount last year. Although Snapchat is a unique platform I feel it doesn’t reach a large enough audience or resonate with any audience other than millennials. Personally, I don’t however believe that snapchat is doomed. Mostly everyone I know uses snapchat including me and I believe because of its individuality that it will stay within the main stream social media platforms. As far as attracting more users, Snapchat really doesn’t have much functionality. It’s used solely for only a few purposes that now can be used on other apps. I believe Snapchat will come through and work through these issues, but some things are definitely going to have to change. 

Student

I think this means Snapchat may need to reevaluate their revenue stream, especially around advertising. I am partly surprised at this massive financial hit they are taking as I've noticed so much more "cool" commerical advertising on the platform. I am not surprised though because as far as "functionality", Snap chat is really only used for a few purposes. Which I enjoy, but could see why others would retract from the site. Snapchat, will need to adjust their audience, but that will be tough and tideious as they will not want to alter the nature of their platform too much. I think it'll be intersting to see what Snapchat does. I also read a study that said many companies use snapchat for advertising but that advertising is not "the most impactful", so it may be interesting to change that structure as well. 

Student

I believe Snapchat is a widely used app by millenials. I am surprised to hear they lost the amount they did in 2016. I do believe Instagram providig "stories" on their app as well took some focus away from Snapchat, especially because the editing featured on Instagram. I still believe Snapchat is unique in its own way, and know many people that use it daily. I believe Snapchat will bounce back if they work to target a wider audience and provide a new feature different from what others have to offer.

Student

I think Snapchat is unlike any other social media platform out there and although they have lost some money last year, in the grand scheme of things it is something they can bounce back from. It is so competitive and they will constantly be striving to receive more users and adapt to make the app more interactive and creative. It has so much potential that it still can be acquired by a more profitable company and they may need to change their model to attract more advertisers in the future to get greater revenue. 

Student

I'm really not shocked that snapchat lost so much money in 2016. The app has one main purpose and it is to snap pictures of your day to day life to show to friends, and make stories. You can do this on many other apps, not the exact same way, but it is similar and possible. Instagram came out with stories too a few months back, which took a lot of the thunder away from Snapchat. I think snapchat will be bought up by another, more profitable, company in the next few years unless they come out with a feature that is so new and no other app can provide. Snapchat is already very available to a large audience, ranging from any kid with a smart phone or ipod, all the way up to people that are my moms age (50+) 

Student

Personally, I am not surprised that Snapchat has lost $515.6 million in 2016. Other social media applications like Facebook, YouTube, Twitter, and Instagram has users of all demographics, unlike Snapchat, which has a specific target market. According to the article, "What is Snapchat's Target Market and Market Size, and How does it cater to that Market", 7 out of 10 Snapchat users are Millennials. Even though Snapchat is not dominating a larger target market, it's repeating loyal users should be priority which is being shown through loss in sales. I do not think that Snapchat is doomed at all. I think Snapchat is establishing its loyal customers while experimenting with risky innovations. I predict that later in the future, Snapchat’s IPO will rise and eventually target different audiences. If Snapchat tries to drastically change its brand in order to target new users, then it will lose loyal customers.  

Student

I did not use snapchat usually, but I think the snapchat is most interesting apps in social media apps. It is a kind of new way to connect with friends in free time. It is not face to all kind of people, it just face to free time people I guess. So it is positioning in leisure and recreation instead of main social media.

Student

I think Snapchat has come a long ways and I am surprised to hear that they lost profit in 2016. I think the app may be bought out by a bigger company, but in order to prevent that I believe Snapchat must appeal to a bigger audience. Right now only young adults and millenials who have smartphones use the app, whereas Facebook has a much larger and broader audience. Snapchat should continue providing news on their Dashboard to attract more users and maybe make it accessible to people who do not have smartphones but have cameras on their laptops or computers. 

Student

I am very surprised to read how much Snapchat lost in 2016.  It is an app I use all the time and will for the foreseeable future.  However, I do not believe Snapchat is doomed at all.  Facebook has grown to also be a place where we can get updated news.  Although Snapchat also has cool news stories, it is nothing compared to Facebook.  I think this is a step in the right direction for Snapchat but they have a long way to go.  Snapchat needs to have more advertisements to create more revenue.  They also need to attract a more profitable audience by adding more elements to their app.   

Student

I have said Snapchat need a large market, so I do think losing money is not surprise. Snapchat need add more functions, for example, Wechat, we can take a video with family, pay for business, order transportation tickets, order movie tickets, link credit or debit card like Paypal, save coupons and more. If Snapchat want to attract a wider, it need learn from Wechat or other social media apps.

Student

As someone who uses Snapchat on a daily basis, I am surprised that the company has seen such dramatic loss in the past year. However, I do not believe the company is doomed by any means. I think the problem is that the app is generally marketed to millenials, and they need to do more to expand that target audience. Facebook has done so well and seen such a large profit because their users range in age from 13 to 70+. When Facebook first launched to just college students, they would not have seen the increase in profit that they are seeing now after expansion. If Snapchat wants to avoid having to sell, I think they need to target wider audiences and keep up with attracting large advertisers as they have been doing with the NFL, Buzzfeed, Cosmopolitan, etc. 

Student

I think Snapchat needs help grasping their audience more. I remember when they tried to get users to pay for the filters, but that did not last long. Since it is used more by a youthful audience, gaining profit can be tricky. It might come down to Facebook purchasing the company as it did Instagram and take more risks to gain profit.

Student

I think that this means that Snapchat is in danger. If they've already lost this much money, they could expect to lose. This doesn't totally surprise me though becuase although Snapchat is a huge company, their target audience is almost limited to young adults whereas Facebook has users of all ages. I think that Snapchat has a good chance of bouncing back though and I don't necessarily think that they will be taken over by a larger and more profitable company. They're coming out with updates all the time and this could be what they need to stay afloat. In order to do this though, I do think that they need to attract a wider, more profitable audience becuase their current one is just not cutting it. I'm not sure if changing their model is what they need to be doing, but Snapchat definitely needs to be doing something, and fast.

Student

As an avid Snapchatter, it's interesting to see how such a young, innovative social media platform will bounce back from losing this money.

Student

This is surprising that Snapchat lost $514.6 million because I can people using snapchat all the time. But unlike the other social medias like Facebook and Twitter, Snapchat has a particular audience which are mostly teenagers to college students. They should attract a wider audienece to older people as well because they also spend a lot of time on Facebook or Twitter. I dont use snapchat anymore because now Facebook and Instagram has similar functions people can use. I think Snapchat should add more unique functions that can capture the audiences. 

Ross Johnson's picture
Instructor
2/17/2017
New Media