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 don't believe this means Snapchat is doomed. I think a lot of companies struggle with their inital IPO. I do believe they need to reach a wider target audience. I feel Snapchat appeals to millenials much more than the older generations. They do struggle with advertising just because it is limited in its current model. This also is a fine line that they must follow closley because more advertising could turn people away from the application as opposed to gaining more users. I can see them getting bought out in the future but as of right now I think they will work things out and be just fine with their initial IPO. 

Student

This is definitely a surprise to me that snapchat lost $515 million last year considering how popular I feel it is with people my age and younger.  I think snapchat will be fine I think they will be acquired by a more profitable company, I just cant picture them failing.  Something that I think snapchat can do is try to attract the older audience because it seems as though the majority of the older audience using it are celebrities.  I feel as though its already popular enough with kids my age and younger that they should just try to focus more on the older audience.

Student

Losing money is not a surprise. I only use Snapchat once or twice. I found that it is not interesting as Facebook or other social media. Snapchat is getting old and out of the market. I think that they should change their model, and have more functions on this App. 

Student

I expected this. Snapchat's audience is limited to teenagers and younger adults, while Facebook and Twitter hit audiences of all ages. This younger audience, on average, is also less likely to make purchases than wealthier, older adults, so they get a higher profit and return on investment from marketing to these older people through other platforms. Unless the brand only targets young people, it is overall a better option to do paid marketing on other sites as they will get a higher reach.

Snapchat is better used for social and not marketing purposes, in my opinion. Although it is still used frequently by these young people, the money comes from paid marketing. Snapchat could update their services to try and incorporate the older audiences in response. They could make the site more simple, and include services better suited for older audience such as legitimate news sources. This might be their savior. 

Hopefully, Snapchat's fate isn't similar to Vine's, another recent social platform forced to shut down after a harsh loss in profits. 

Student

It definitely surprises me considering the advancements that snapchat had this past year. But it is important to think of their demographic. Snapchat users are a small target market, made up of teens and college students, compared to other media platforms like Facebook. I think it would be smart for Snapchat to sell to a larger company just like the Facebook and Instagram partnership. Although, if they want to try to salvage their profits I would suggest reaching a larger market and adding more benefits to the app.

Student

As I was saying last week, Snapchats loss doesnt come as a suprise to me. I think it is getting old. Many of my frineds have reduced their usage or stopped using it all together. I think that the switch to try to accomadate new users would be fatal for them, however, using more advertisers would be benificial to their income. 

Student

I am surprised to hear that Snapchat has lost so much money during its journey to go public, especially because it seems as though last year was a prominent year in the media and across the country. It is likely that Snapchat could be facing one of the latter stages of the "Innovation Curve" where the late majority is beginning to jump on the bandwagon. Unfortunately, this means that Snapchat will likely have to keep up with its audience and see what changes need to be made to ensure loyalty to the app. 

Student

It seems to baffel me as well that snapchat lost half a billion dollars, especially since it seems 2016 was an insanely big year for the snapchat company. I would assume they aren't profitting as much as compared to 2015 and 2014 because a lot of people seemed to have already had the snapchat app on their phone. Since they have been so succesfful with making snapchat easy to work with and fun for multiple audiences, I don't believe snapchat is loosing money due to decreaed popularity. The snapchat app in that case needs to be introuduced to more different types of audiences/users. The snapchat company needs to get together, along with a couple public companies, see if they can become a public company, and then branch out some ideas with other companies to see how to improve the usage. 

Student

I am surprised Snapchat lost so much money last year. They have made many positive improvements in the last year that, I assumed, helped them gain value. Especially, since they allowed advertisers to create their own Snapchat filters to advertise their products. Yes, they lost millions of dollars but their value is much greater. The loss may be insignificant to them in the grand scheme of things. Though I think this gives them the opportunity to evaluate their business model and see where changes can be made. If I were working for Snapchat, I would try to hone in on advertisers, big and small. Snapchat has the technology to target consumers based on their location. This technology can be very valuable to advertisers. Use it to make money. 

Student

It is weird to think that Snapchat is losing money, since it is so widely used.  It does make sense that there are not many new users since most people who are in the target market of the app have downloaded it.  Since Snapchat is losing money, the future does not seem to be bright for their company.  I could see the company going public and being acquired by a more profitable company.  This tends to happen when companies are unable to survive on their own, and need the extra push from a more profitable organization that will help them survive.  I think the audeince of Snapchat is good, since it is a large audience of people ages 13-34, however they may need to find a way to attract the older crowds.  If they changed their model, it is very possible that they could become more popular once again, leading to profitablity.  

Student

I haven't thought of Snapchat as losing value within the past year. The app is still huge within the Millennial audience and even younger generations. But overall, I think compared to the other apps and networks that are expanding at a fast rate, Snapchat is falling behind. In my opinion, adding the advertisement options may be currently adding little benefit to the company because Snapchat users initially joined for the simple and straightforward communication with just friends. With the advertisements and other recent changes, Snapchat is blending in with other networks. However, I think this means that Snapchat will make a comeback after previously making many similar changes to Facebook—which made an apparent turn around when it started to fail as well. 

Student

I think what this means is that unless snapchat expands their modle a little bit from just taking pictures to send to you friends, theyre going to get bought out from a larger company. I think a great way to fix this would be to create a website or a "desktop" version of the app. Most apps have a website version and vice versa. Facebook, Instagram, Messenger, all can be accessed from online, but snapchat cant. If they do this I think they'd be moving in the right direction. 

Student

I believe that snapchat is going to be acquired by Facebook itself. If it isnt doing well already odds are it wont be able to recover after already going public. They do already have a lot of ads and promoted material on snapchat so it is definitely a possibility that they are acquired.

Student

I was pretty surpried to hear that Snapchat lost value so quickly, but I do think that this has to do with who they target. It's really popular for millenials, but besides that it doesn't reach many other generations which is a problem in itself when trying to be successful. I think that they need to keep their model, they have been changing it a lot and although a lot of it has been successful in the past, I don't think that many more changes can be made to keep up it's success. I think they need to focus on keeping up their audience they currently have and try to reach out to more advertisers. I don't think they are doomed, but I know that this isn't what they expected. 

Student

This is actually very surpprising to me, because I think Snapchat is the biggest it has ever been. They have added so much to the app including advertisement, specific stories for where you are at, online news content and more fun too! I'm not sure what this means for Snapcaht but I do think they need to think about broadening their audience. No, I don't think they are doomed but soemthing needs to change so that they don't keep losing money.Widening their range of ages of users will attract even more potential advertisers and users. Personally, I love how snapchat is marketed toward a younger audience and how it is perfectly tailored to people around my age. If they can figure out a way to keep doing that while still broadening their market, I applaud them.  

Student

Honestly, I blame Facebook, which owns Instagram, for stealing all of Snapchat's ideas. I don't know why Snapchat hasn't gone after them legally because Instagram straight-up stole all of Snapchat's defining features, rendering Snapchat nearly obsolete.

Student

I think that this means exactly what many investors are thinking- Snapchat will not get the valuation they are seeking. This week as Snap Inc. went on its investor visits, reports surfaced that they will likely get a valuation around 15-18 billion, much less than expected. Snapchat is valued for its userbase which may give a company like Google or Micosoft ( who recently aquired LinkedIn) the chance to buy it. If, like Facebook and Twitter, the stock sinks a couple months after the IPO it could be a more atractive buyout option than Twitter. I do think they will need to adopt a better model for advertisers or offer a pay for channel system for their news. I do not think they should charge consumers, but rather have networks pay a premium for ttheir channel to be inside the app, and then charge for ads based on views like tv networks do, rather than have random ads inbetween friends stories.

Student

I was surprised when I knew Snapchat lost money last year. Because for our generation, Snapchat is pretty popular among the youth, all my friends use Snapchat to chat with each other and I enjoy this type of communication with my friend. However, Unlike facebook, the main audience of Snapchat is the Millennials or the generation which born after millennials. I noticed that the new version of Snapchat increases a lot of advertisements, compared to the old version. I think one strategy they have right now is to attract more advertisers but not change their model. I would say Snapchat can gain more users in the future because it creates a new way for the youth to communicate. 

Student

From my perspective, Snapchat need make some changes. The company need attract some companies to put their advertisements on it. Also, Snapchat need provides some paid filter. It can gain profit on it.

Student

Although I am surprised to hear that Snapchat is losing value so soon in its digital life, it got me thinking about what differentiates it from more long-lasting social medias. I think one inherent flaw is that Snapchat targets its youthful audience, but doen't stretch much beyond that. Yes, all my friends use snapchat as I've seen some classmates post, and I agree, mine do too. But do your parents? Do your grandparents want to learn? Does your local library offer Snapchat classes? Snapchat's biggest downfall is its limited generational draw. Think about Facebook- the site became popular and spread across generations, with parents, grandparents and local librarians wanting in on the fun. Facebook is advertised and talked about in the real, physical world, outside of the app or website itself. With Snapchat, I believe its trendiness and portrayal as silly by older generations has held back its success. Then, once its earliest fans grow tired of it, there isn't an eager grandma waiting to learn that makes up for the usage drop. Snapchat will need to expand to older audiences and break out of the app-universe and into the real world if it wants to grow to reach broader audiences. 

Student

Out of all of the social media accounts I have, Snapchat is definitely one of my favorites. I was very surprised to hear this news about snapchat but am not too concerned about their future. Yes, I think snapchat has a very direct audience but I don't think that it means they are doomed for failure. The audience snapchat appeals to typically is middle school through college. I personally can't see myself using this app when I am years out of college, but there is really no way to tell! Something that snapchat has done that makes me believe they have a promising future is their "discover page." It is quite impressing how much information the app holds that can appeal to their audience. 

Looking at the app now, when visiting the discover page there is stories from "10 Dating Horror Stories that will mortify you," to an article from the Washington Post, "Will California leave the U.S." 

Yes, I do think this $514.6 million dollar lost for snapchat is not great but I also think they will bounce back from it. 

Student

I was actually quite surprised to learn that Snapchat went public and lost money in 2016 - mostly because ALL of my friends use snapchat every single day. It's more popular than twitter and facebook within my friend group. The only app that can compare or compete in popularity would be instagram. However, I think this could potentially mean their audience is too small. Even if they are doing really well in the audience of high school to college age students, that audience just might not be enough to make a profit. I think they will likely be aquired by a larger company. Changing their model would likely ruin the desirability of the app that it's loyal users seek. 

Student

I am more than surprised that Snapchat lost money last year.  It seems like more and more people are using Snapchat as a main method of communication, and the popularity of the dog filter is at its highest!  (Come on, there's never a wrong time to use it)  I think Snapchat's loss may just be a trough, meaning that the only way to go from here is up! As a frequent Snapchat user, I can say that there were plenty of glitches last year, and the rate at which they were fixed may have turned people off.  I do think that they are off to a good start in 2017, though.  Any time the app requires an update, the description is more in-depth and there is an option for a tutorial next time you open the app.  For example, when the animated filters first came out (ex. the rainbow vomit and zombie eyes) I saw in the App Store that new filters were available, but was confused when I would swipe through GeoFilters and not see anything new.  Now when there are updates, Snapchat gives instruction on how to unlock the new features and how they work.  Hopefully this helps them out adn brings back any users that may have left in the past year!

Student

I think Snapchat is losing so much money because when it started it was a new, innovative product but after it became wildly popular, they haven't done many improvements. With technology being able to change so rapidly, people in this day and age lose interest quicker than ever. If Snapchat wants to avoid being acquired by a larger company, they need to come up with something that no other social media platforms have. Now that Facebook and Instagram can go live, Snapchat seems like a thing of the past.

Student

I was quite shocked when reading this news about Snapchat. I think it means Snapchat is facing a huge challenge because Instagram, Facebook and YouTube have similar features like Live video and online chatting. It may be acquired by a more profitable company. They do need to attract a wider, more profitable audiece and change their model to attract more advertisers. They need to create some features that other social media does not have, which is unique and innovative. 

Student

I think that the initial intrest is starting to wear off while the content that snap chat provodes is very boring and political. If they want to continue to grow and do well they will need to be more equal in there advertising and storys that they provide. With that and upkeeping new featers like there filters they will have abgood chance of doing well in the future. 

Student

Snapchat has become a unique social media device that typically maintians users from the millennal genration. It's much more difficult for SnapChat to gain a strong voice. Snapchat is a quick ap, meaning people send and revieve snaps in a split second. You see former popular social media sites like Vine and MySpace becoming defucnt. SnapChat may have to find a way to appeal to older users, which will attract a more diverse group of advertisers.

Student

I do not think Snapchat will be doomed to be acquired by a more profitable company. I think they should come up with new ideas to make money off of advertisers and sponsors in order to continue to make a profit off of the app. I also think that Snapchat should come up with new and exciting additions to the app that makes companies want to advertise via Snapchat and attract new users.

Student

I don't think we can count Snapchat out and call this totally bad news. Everyone, including me, assumes that Snapchat is targeted at a younger audience. I am not saying that it isn't, because it definitely is. But, more frequently I am hearing of older people joining in on Snapchat. The older generation will obviously never be Snapchats main audience, but I think the fact that some of the older generation is hopping on the Snapchat train says something about Snapchats ability to cross generational lines. I also think it is okay that Snapchat sticks to the audience they have now. I am a 21 year old college student, right in the prime of Snapchats target audience. Once I graduate in May, I will, hopefully, have a full time job and making more money than I did while in college. But, just because I have this job does not mean that I will stop using Snapchat. I say this to say that the audience Snapchat is targeting is in the process of transitioning to becoming a more profitable audience, all while not transitioning out of being Snapchat users. I think they could try changing their model to attract more advertisers, but as it is now the ads on Snapchat are so easy to avoid. The ads pop up at the end of someones story, and it is very easy to slide out of the ad and continue going down your feed watching people's story. So yes, they could attract for advertisers but I don't think that will increase people watching the ads and that might be difficult to pitch, as I said the ads are not being watched as is. 

Student

I was very shocked by this information about Snapchat. I really don't feel like there is anything else like this on the market, but then again, Instagram has really stepped up with its "Stories".  I just think that this means that Snapchat will have to keep coming up with new and interesting things that will attract their audience. It always seems as though Facebook and Instagram, etc. are. I do not think they're doomed seeing as they are really are the only thing like this within social media, as I said before. I don't see them attracting anything better than the audience that they have, so perhaps the model will have to updated and changed. 

Student

I think that Snapchat is trying not to be acquired by a more profitable company. This summer, as an intern,  I was invited to many "Lunch and Learn" sessions where snapchat was being taught to be utilized as a way to enhance a company's reputation and brand. I do think that snapchat needs to try to attract a more profitable audience because most of the users of snapchat are those who don't use it to generate any income. I do not think changing their model will help because it is unique, but maybe changing the way they brand themselves to different audiences.

Student

This is a bad news for Snapchat. I believe that Snapchat only attract younger group. Besides, the older generation did not even know what Snapchat is. A important reason that Snapchat lost its audience is the high competion of social media apps. Like Facebook, Instgram and Twitter. Those social media apps take place of Snapchat, young people can not use too many apps with same function. For my recommation, Snapchat should add more unique function to attract young group and add more convincent function to attract old generation. By the way, combine with other social media platform is a good way to grow.

Student

Snapchat is a brand that has strived to stay relevant and topical in its market.  I was interested to learn that it was losing so much money because it continues to be a channel for social media advertising and fun filters that fit into what is going on in pop culture.  I do not think that Snapchat is doomed, but they definitely need to find more routes for income and revenue.

Student

With the way that social media is evolving it is not surprising that Snapchat is losing money. Instagram offers the opportunity to post stories which is similar to Snapchat. Instagram and Facebook are now allowing for people to live stream what they are doing. If Snapchat is to not become acquired by a more profitbale company they need to add a new unique element that will draw in more users, allowing them to charge advertisers a higher price to have they sponsored content. 

Student

I think this will not bode well for Snapchat at all. Losing $514.6 million in a year is a large loss that most companies cant recover well from. I believe that Snapchat will have to make large changes to its app, or implement more features to improve its importance and usage among users. I think in the long run it will be acquired by a larger socail media company such as Facebook. Instagram has implemented stories which is essentially the same concept as Snapchat's My Story. If Snapchat wants to succeed it will need create something that makes Snapchat more than an app where you just send pictures and videos. It also needs to do something in order to increase its target audience and appeal to older generation.

Student

Snapchat is in trouble of being acquired by a more profitable company. With Instagram having similar features and Facebook adding Facebook Live, Snapchat needs to change their model and attract new advertisers. If not, they might get bought out. 

Student

Their consistent losses paired with their astronomical valuation are grounds for disaster. It is a possibility that Snapchat is acquired by a more profitable firm, however they have turned down offers in the past due to large egos and a belief that they would be able to effectively monetize their massive amount of users. What I feel is more likely, is that Facebook successfully continues to steal their platform and implements it further on Instagram.

Since the introduction of Instagram stories, it has been reported that the use of Snapchat stories is down over 20%. This is the beginning of the end for Snapchat if they do not alter their business model to attract more advertisers. One route that could be successful is to continue to grow their presence as a news broker, they could possibly rebrand themselves as a news medium for the on-the-go generation. 

Student

I'm actually not surprised that Snapchat is losing as much money as it is. Instagram, which appeals to a larger demographic, has adopted similar features that make the app just as, if not more, intriguing than Snapchat. What I have noticed is that people like anonymity and Snapchat doesn't really encourage that. The user is always aware who has seen what, if they screenshot the photo etc. On Instagram, as unsettling as it may sound, people have more freedom to "lurk" and are more inclined to snoop around various people's accounts. On Snapchat, it's a little more difficult to navigate different stories and to explore other accounts.

Sure, it's fun to send stupid photos to people you care to share them with but I don't know if that's enough to keep the app successful. They'll probably need to add some sort of unprecedented feature that cannot be replicated by other apps to remain relevant. I genuinely would not be surprised if Snapchat was bought out within the next few years.  

Student

I think this bad news for them, because it attracts only the younger generations and will probably never reach the interest of older generations. Most older people I know have no idea what it is or how to use it. They absolutely need attract a wider audience but im curious to see how they will do that when both of their competitors have already done so. 

Student

With most social media sites, their popularity starts with younger generations and works its way up. The more successful platforms, such as Facebook, have expanded their reach to all age groups. This is one platform I don't think will ever catch on with older generations. I know very few 30+ year olds who enjoy spending their time taking selfies and applying funny filters. I believe Snapchat could very well end up like Vine and shutdown before ever becoming extremely profitable. This is unless of course some drastic changes are made to draw in a wider audience.

Student

The fact that Snapchat lost money isn't surprising because Instagram has added a feature similar to Snapchat. Instagram probably has more users and many of them are using Instgram stories instead of Snapchat. I don't think that this will be the end for Snapchat, however, because it does offer features that other apps don't (filters, geofilters, customizable filters for events, etc.)

Student

The idea of Snapchat is truly brilliant. Both founders discovered something that no one had ever thought of and it clearly paid off. However, I am surprised to hear that they lost over $5 million in 2016. The only problem I can see them facing is that their target market isn’t a wide casted net and their competition is growing. Instagram's story feature is being more popular every day. I think for Snapchat needs to keep adding exciting new features to its app. For example, constantly updating their filters. 

Student

The idea of Snapchat is truly brilliant. Both founders discovered something that no one had ever thought of and it clearly paid off. However, I am surprised to hear that they lost over $5 million in 2016. The only problem I can see them facing is that their target market isn’t a wide casted net and their competition is growing. Instagram's story feature is being more popular every day. I think for Snapchat needs to keep adding exciting new features to its app. For example, constantly updating their filters. 

Student

I do think Snapchat has a very unique concept compared to other social media platforms. However, they have a narrow target audience. Snapchat is typically used by a small demographic typically 16-25 year olds which is very limiting compared to other social media brands. I think other brands may be more marketable because they appeal to a larger demographic and are used by people who often invest or are involved in the stock market. I think that Snapchat will not reach the same status as other social media brands, for it is a very niche product which appeals to a specific demographic. 

Student

This is very surprising. I was only aware of the IPO at 20-25 bil ($), I had no idea of their $500 million loss last year.

 

What new market/advertisers can Snapchat better attract to?

Student

I think that SnapChat will have to take a more strategic business support. SnapChat has been seen as a communication platform for friends to communicate with eachother. In the last year it has shifted to include advertsiements and content from businesses that users see daily. Just because they included these ad features does not necessarily mean that it is successful. For examply I click through ANY and ALL ads on Snapchat. The company needs to focus on how to include businesses in a more interactive/profitable way.

Student

I'm pretty surprised at this news actually. But yet again, I'm surrounded my college-aged kids who use snapchat all the time. I think that Snapchat has a very age-specific audience and, if it hopes to continue to be successfull, may need to expand this audience. Most people who use it are the younger crowd, and also there are very limited advertisement slots to be sold (unlike Facebook). But I think that Snapchat will continue to entertain for a long time to come. It's unique in the sense that the photos/videos disappear after a few seconds, unlike any other social media we have today. This allows users to share a different kind of information and record life events that they wouldn't want up for eyes to see forever. It focuses on the "present", which is something that is refereshing for social media.

Student

I started using snap about two month ago. I did not know that snapchat was that big brand. Alot of my friends are using snapchat. Snapchat has been used for huge people. Snapchat could make a lot of money if they when public. it is really surpriseed.

Student

Since starting Snapchat a few years back, I can only remember two major feature updates -- stories, and more recently, filters. Snapchat no longer has a monopoly over stories, with Instagram recently introducing a story feature of their own. And while the filters are consantly changing, it's not enough to keep users entertained for much longer. We can only see our faces as so many different animals before we start to get bored. Having personally used Snapchat for several years and only seen two real major updates, I think Snapchat will have to come up with another big feature, and they'll have to do it quickly. Also, I see the marketing benefits of advertisements, adding them in to play automatically after stories is a quick way to annoy (and possibly lose) users. Ultimately, I see Snapchat getting bought out by a larger company such as Facebook. Snapchat was one of a kind for awhile, but with more competition every day, they really need some innovation to keep users around.

Student

For snapchat i don't think this means to change anything their doing or the way they advertise, because at the moment it seem like they have the widest audience between the main social media sites as is. I  believe they may want to change who's in control of their decision making so that they can make better choices moving forward so that they can be more profitable.

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