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 is losing money because it is losing users to Instagram and Facebook. Snapchat's adience is limited primarily to young people. Snapchat used to be the only mobile app that featured fun filters and photo stories. Now Facebook live videos and Instagram stories are adding to their competition. It is possible that another social media site like Facebook could take over Snapchat unless they acquire a larger audience.

Student

I am surprised to hear that Snapchat lost money in 2016. I thought that the company has been doing increasingly better since they have gotten more popular. In recent year’s they started to obtain advertising and news articles sponsored by major companies post on Snapchat. I think that Snapchat will figure out ways to increase their profits but they may be bought out by a larger company if they can’t make enough money. Snapchat is on its ways to becoming a major company, they will just need to establish new and creative ways to increase profits. 

Student

It means people's likes are changing. I don't think Snapchat will continue to be the most popular social media apps in America. Because there will be more and more apps coming out. And people's hobby are changing. I think they need to ad more interesting program in their apps to attract more audience. My personal advice is to keep the style of the Snapchat but creating more function of it.

Student

Snapchat has a very specific demographic and that is why they are losing money. The app is extremely popular amongst young people but it will never be fully adopted by the older generations, which is why they have a cap for their general reach in the population. As millenials get older, I believe snapchat will gain that reach to gain more popularity in these age groups. Since Snapchat is a company focused on trendsetting, this may My question would be: Do you think we will see snapchat grow into other trends to stay relevant or will it disappear over time because of its exhausted goal of staying trendy?

Student

Snapchat is a social media platform that can be replaced by many other apps. If you wanna share pictures you can use instsgram, if you wnat sent a message you can use app named messager attached to Facebook. Even in China we have almost same function app named Wechat. It is not easy to exploit new market since your app has nothing special. Maybe combine the technology with other social media platform is a good choice.

Student

I believe there are several reasons why Snapchat is losing their audience, the main reason I think is the competition from other social media, like Facebook, Twitter, Instagram…those popular social media take place of snap chat, people can’t handle too many social media, if snap chat have all the same function like other popular apps, it will get replaced. Snapchat need to create more new staff over the time, create some new things to get people’s attention and put some money on the advertising, people need the new things, based on their old amount of audience, snap chat can succeed again. as long as they get enough audiences, they can attract more advertisers, then they can get profits.

Student

I do think lose money means Snapchat is not popularity as before, it doomed to be acquired by a more profitable company. Snapchat is not popular in China, so it lose a large market, Chinese always use Wechat instead of Snapchat, in order to get more profit, I think Snapchat need to attract a wider. Snapchat need add more functions in order to make people reply it so that make Snapchat beats other chat applications.

Student

I believe the app is losing popularity because they are slowly becoming a hub for poorly produced ads. Regardless of the fact that covering live events and letting the media showcase short articles results entertaining, they do not run quality checks for their content. Therefore, the information published seems repetitive and many times pointless.
What once used to be an innovative and fun app, is now just a repeated pattern that annoys the ones who don’t want to see the dog filter anymore. Now, there are other social media sites like Instagram that help you achieve similar goals. I believe that everything has an expiration date, and Snapchat is getting there.

Student

Losing money means the snapchat is not as popular as they expected.  More and more social media platforms be created. Most of them have the same function like sending messages and pictures to friends.  Some of calssmates said this is a challenge for snapchat to improve. But I think this is a good time for snapchat revolution. A good product must have unique feature otherwise it must be replace by the new product. If snapchat can't prove themself is irreplaceable, why don't they comblne with other complanies to avoid further lost.

Student

I believe that Snapchat has changed the game in sending photos over the past few years. However, they really have not come out with anything that new or innovative recently. Anytime they update the app, it is usually only for bug fixes and an occasional change in the app's format. I also believe that it will be difficult for them to attract a wider audience since millennials are the vast majority of its users. Eventually, I could see Snapchat merging with another social media company, but at this point only time will tell.

Student

I believe that Snapchat is going to lose their profitability because people are going to grow tired of the app and the few features it offers. Other apps are already starting to include many of the "specialty" features that Snapchat offers. Things such as "stories", where you can post videos and pictures that are on a timer and will go away after all of your pictures in the story are done. I also believe that a larger company will acquire Snapchat to bail them out. Hopefully, do so will also bring about the resources for Snapchat to advance its current operations and become a stronger app all together. 

Student

I think it could be both a disadvantage and challenge for snapchat. As I know, young people around me like to use snapchat, however, more and more communication apps are on their way. The advantage that snapchat has is it is already famous and well-known by people. If snapchat could combine it's current features by creating any sort of camera feature would be even more attractive to people like Faceu from China and Snow from Korea. Also, I think that snapchat could enlarge their users amount by adding groupchat feathure so that it would be even easier for people to use snapchat nsetad of i-message or facebook chatting.

Student

I believe that Snapchat will be acquired by a more profitable company, maybe even by Facebook. Facebook has already acquired Instagram, so Snapchat seems like the next move they could make. I feel like their model does not attract advertisers, because people skip right past advertisements unless they are in the form of cute geofilters. Whenever I see an ad on Snapchat when I am trying to watch stories, I get annoyed and click out of it. I feel like if it is acquired by a well established company, such as Facebook, then they could make a profit off of it through it's connection with bitmoji, and possibly make new connections such as those to make new fun geofilter advertisments. 

Student

I think Snapchat did a good move with starting to do advertisments and such through mystory. They also for major events around the world will have a mystory which people from all over can check out. They have many different stories for all sorts of interests. I think the recent change has shown that snapchat can still be innovative. I believe they are on the up and up right now since they continue to aquire more and more users as more people get cell phones. Snapchat seems to be a dominant app that almost everyone has.

Student

I believe that SnapChat will be acquired by a bigger company that may have innovators and creators who believe that they will be able to take SnapChat to the next level. I personally believe that SnapChat is very common amongst college students as well as highscool students, but people of an older age may not be as engaged into the app as me and my peers are. SnapChat seems to be the most popular app next to Instagram by all college students it feels like. With a wide variety of users with different demographics & geographics, but making it useful down the road maybe for more than just pictures may help as well as making it compatible for a wider range of users of all ages to use the app and see the benefits of SnapChat so its not narrowed down to a younger audience. 

Student

I believe that Snapchat can be successful. Lots of marketers are starting to catch on to the fact that Snapchat is a great network for engaging with followers by showing "behind the scenes" content. Now that Snapchat has Ads, that is another great source of revenue for them.  If they want to increase the number of users currently using the app, they should make it easier for users to find new people to follow. As long as Snapchat is able to show investors that marketers will be drawn to this social network channel and their number of users continues to grow, they should be profitable.

Student

I believe Snapchat has definitely reached it's peak in it's diversity of users. I cannot see anyone over the age of ~28 being an avid user of Snapchat. Although it is definitely one of, if not my favorite, social media app, I think this is only the case because of the current social environment I am experiencing at college. Everyone has a lot more time on their hands at this age then when they will when they enter full time employment and this allows them to post funnier and more relatable content more often. I feel like when all of my friends enter the work force they will only have work content to post, and this will make the app much more boring. Therefore, I believe snapchat is going to have to either make dramatic changes to its format or sell to a more profitable company to keep it afloat. 

Student

I believe, Snapchat will be acquired by another company. They will still have their own identity and be able to function. The guidance from another more suit up and running company will be able to give Snapchat the push needed to be able to relaunch a successful business.  Snapchat already has a wide audience range and at this time that will not change no mater what happens to the compnay. Snapchat just needs to looking to an internal rebranding to be able to come back from the downfall that they are going through at this time. Snapchat has a plan hopefully they know what they are getting themselves into because for me turnung the company into an IPO was not the best decision. I believe it will do well as branch of a even larger company that way the two can work hand and hand.

Student

I do not think Sanpchat is doomed to be acquired by a more profitable company. Companies like Snapchat face possible threats like this periodically throughout their spans. Facebook has been successful enough to recover from a period of decline in teenage users and was able to bring them back. Snapchat knows their audience and knows how to market to them. However, they should model to attract more advertisers to constantly add new filters for users.  

Student

I think Snapchat is at a position where they could use it to their advantage. A larger company could easily come and buy snapchat just like Facebook did with Instagram. Although they wont be privately owned, it will be a chance for the company to become more profitable in the long run. As far as audienceces go, I do not think thye need to reach out to more audiences. I feel if they do that they will make the uonger crowd migrate away from using their app which had originally happened with many other sites once new audiences entered.

Student

It's unfortunate that Snapchat lost so much money while in the process of trying to get an IPO. I do believe that the company has found their target market and has taken full advantage of that. I think that many large social media companies have had their financial struggles and it is possible that Snapchat could be bought out by another company. I think they have reached the correct market but with many social media networks offering the same updates it is difficult to stand out. You can send pictures and videos to people directly through Facebook, Twitter, and Instagram but Snapchat has become a fan favorite with a certain generation and I believe their success will continue to grow.

Student

I think that Snapchat has a chance of being bought out by a more profitable company, but I don't think it will happen anytime soon. With that loss I don't think it looks like a very appealing company to buy, but with time and more ways to advertise, I think it could become attractive to companies. I think what makes Snapchat unique is what is hurting it. With pictures and videos that last 10 seconds at most and then disappear, it's difficult for an advertiser to make meaningful content for the audience. The fact that Snapchat has made the pictures and videos skippable has also hurt them because people just skip the ad content. I think there would be two ways to help remedy this problem: change their model (like making pictures unskippable) or advertisers become more inventive about how to use Snapchat. Since there is no doubt in my mind that advertisers are not already doing this, I think a small model change could work in Snapchat's and advertisers' favor.

Student

I think Snapchat will soon be bought out by a bigger company and no longer be an induvidual company. This is the same thing that happened with Instagram when it was bought out my Facebook. I think snapchat will continue to be one of the most popular social media apps for years to come; however it will be benefical to be bought out by a larger company. This will allow them to find ways to attract a wider audience and change their advertising techniques. 

Student

In my opinion, this definitely doesn't look good for Snapchat. Especially for a company that's in it's infancy, losing money this quickly obviously doesn't help to make matters any better. In terms of it being acquired by a more profitable company, I believe that this is definitely a possibility, however it is also possible that any company who would have the purchasing power to acquire Snapchat no longer views it as an entity that is worht their time and money, leaving Snapchat to fend for themselves. If Snapchat is to have any hope of becoming profitable again, they will most definitely have to come up with some sort of innovations to attract a wider, more profitable audience. I don't believe Snapchat has to completely change their model to attract advertisers, seeing as it is one of the most popular social media apps, but they do need to develop some new ideas to make themselves more profitable.

Student

I think Snapchat is a very interesting App. I think it needs to reinvent itself a little bit. It appeals to such a small demographic and has very little room for growth with it's current model. To appeal to an older generation, I think Snapchat needs to improve the messaging aspect. Older people don't communicate to each other through pictures. It may help them improve profitability. 

Student

I think this can be a chance for Snapchat, which is definitely not a doomsday. Although, Snapchat lost half billion last year, but its popularity was not decreased.  When Snapchat first came out, it was accepted mainly by middle schooler and young adults. People enjoy to watching short film, and it was a new type of social media. But at that time, Snapchat only accepted by American. As an international students, I can tell that more and more people starting to know this app, and learn to use it; in other words, more and more users are entering this social media, so it is actually a chance for Snapchat to creates some new technology. On the other hand, since only young people accept this app, maybe they can create some new function that other age of generation can also be their target. Therefore, now Snapchat is still popular, I think this failure is nothing but a chance of going higher.    

Student

I think that Snapchat will no longer be an individual company and will be bought out by a bigger company eventually. This happened with Instagram as well as it was bought out by Facebook in 2012. I think in order to keep on the up and up they need to find ways to attract to a wider audience as far as older people and change their advertising techniques. 

Student

I do think that Snapchat will continue to be one of the most popular and frequently used Social Media network for years to come; however, I believe being bought out by a public company will be more beneficial to them in the long run. To be acquired by a more profitable company, will allow the app to be expanded and become more resourceful. If the platform was able to be accessed by a computer it could attract a wider ranged audience. In addition, the advertising, news articles that are available on Snapchat tend to be skipped over by the users, which defeats the purpose of having them there in the first place.

-Olivia Miller 

Student

If Snapchat does not want to be acquired by a more profitable company, I think its best chance is to change its model to attract more advertisers. Right now, ads are entirely skippable. While that is great for the user of the app, it isn't so great for the advertisers. What does this mean? Advertisers who are aware of this skip option are less likely to invest in advertising on the app. Why would they waste money on ads that most users would never see? They might as well be throwing money out the window! But, if Snapchat changed this model so that ads were not skippable, or so they popped up at the bottoms/tops of screens so they were less invasive, advertisers could invest knowing their ads would be seen. In the latter, both users and advertisers could be happy knowing their content was not entirely invaded--the screen could be shared once in a while!

The reason I don't think attracting a wider, "more profitable" audience would work as well is because, first, what is a "more profitable" audience? An audience that would be willing to pay a subscription fee in order to use the app? If even this were so, Snapchat's demographic would likely not change. The only change that would be seen is a decrease in younger users, but I do not think they would be replaced with older users. The Snapchat demographic is millennials for numerous reasons, and trying to switch audiences would only waste Snapchat's time and resources.

Student

I do believe that Snapchat will remain a staple in the everyday lives on millennials but Snapchat needs to make many changes in order to stay a float on their own. I think there is a high possibility of Snapchat being bought by a bigger company within the coming years. They need to find a way to broaden their audience to older individuals and find a way to use more advertisements without becoming an irritant for users. 

Student

I definitely think this means the end for Snapchat being an independant entity. I am actually surprised to learn that they weren't already bought by a bigger company. Snapchat will have to broaden its audience as the only people that use it now are the 14-30 crowd and the celebrities that care enough about that audience to connect with them using pictures and video. Im not sure how they'd do it but being able to attract the slightly older generations might help them out a bit.

Student

I do not see snapchat losing its spot as one of the most frequently used social media platform among younger crowds. They definitely need to appeal to advertisers better though because that is how they will make their profits. What comes to mind when I think about the advertisements I see on Snapchat is that you can skip over them - as compared to something like YouTube where you are required to watch some every so often. 

Student

 

I think that the platform of snapchat does not coincide well with advertisements. Recently on the app I have seen ads pop up after watching a snapchat story and it seems very abrupt and out of place. I also think that SnapChat is an app that is primarily used for younger people, they may have problems getting advertisers given that the people who use snapchat is such a narrow target audience. 

Student

Snapchat definitely needs to keep advertisers interested as this is the majority of how they make money. Facebook's WhatsApp is now updating its Status feature so that it is almost identical to Snapchats Stories. I believe that the brand is positioned in a way that makes Snapchat a top-of-mind product so I do not see it losing relevance or the top spot anytime soon. Facebook has already offered to buy out the company for about $3 billion in 2013 and this was turned down by the founder of Snapchat so it will be interesting if this IPO will provide the same.

Student

I believe that this means Snapchat will need a drastic change in order to attract a wider audience although it is difficult to put my finger on what that change could be. I believe that their advertising model is very generous to Snapchat users because they are able to click through ads they aren't interested in unlike other social media platforms. In order to survive, I think Snapchat will need to be bought by a more profitable company.

Student

This is not good news for Snapchat, but I think that they will still stay around for a long time. Nowadays, there are so many different apps that do similar things its hard to stay in the competition. But Snapchat is a favorite right now, even though they are losing money I see potential for a bounce back. They may need to make some changes, but I don't anticipate Snapchat disappearing anytime soon. 

Student

It's not great news, as it is not a platform that can easily make money without starting to charge for more services, or improving advertising (which is not great currently). And sure, some companies are losing (a lot) of money when they file their IPO, but there is usually a plan for the future to take care of that (such as Uber getting rid of human drivers), but I've yet to see anything substantial from Snapchat. 

Student

I believe snapchat will continue to lose money in the next year or two but will continue to be a favorite social media site among millennials and younger people. That makes me believe a bigger company will eventually buy them out and find a way to make snapchat a more profitable app. They need to focus on growing the audience of the app because that will then cause advertisers to notice the app more and pay for more content on it. I believe we could see snapchat make a move to add things like trending topics for the days that people can send their snaps into with sponsored content which will generate more daily users. I think snapchat has a bright future and will figure it out. 

Student

I don’t think this will be the end of snapchat, it has a strong audience with the millennial generation and younger generations. But I do believe this is a wakeup call to the company. They can’t ignore the data given and they will need to come up with some solutions soon before the problem becomes worse. I think they should increase the pop up adds like other app do and sell advertising to other companies that would benefit from the audience of snapchat already.

 

Student

I personally believe that Snapchat won't be gone for many years to come. They have a very strong following with millenials and kids younger than ever are using it now. It's very understandable that they are struggling to make money because there isn't a large platform to advertise other companies on. I think the solution to Snapchat's problems will come down to them either being incorporated into a larger company or highly increasing their pop-up advertisements and selling those spaces to various companies. 

Student

I definitely think this is a wakeup call for Snapchat. I certainly do not think its the end for them, but it shows the creators that something definitely needs to be done. I do not think it is doomed to be acquired by a more profitable company because Snapchat is all about branding and almost everyone at least knows what Snapchat is and all of the things you can do on it.  Snapchat should definitely look for more ways to attract new users and make sure there is more of a diverse audience. I think that would definitley help them out with more and more users, to make sure a more profitable company doesn't take them over. I also think putting in ads or something along those lines will help them raise their profits, but I don't think they will ever keep up with the constant success of Facebook. 

Student

I think snapchat will still be around for the next coming years, but I think it will decline in users and will eventually be picked up by a larger company. I think changing their format too much would result in a quick loss of users rather than a gain. It is very hard to change a perspective of a product from bad to good and many people in the world know what snapchat is and have already made the decision to use or not use it. 

Student

I don't think this will be the end of Snapchat.  The platform still seems to be widely popular, especially among teens and millennials. Even though the brand is losing money, I still think there are some ways to possibly improve the platform.  One thing Snapchat should do is try to appeal to a larger and wider audience.  Compared to other social networks such as Facebook, Twitter, or Instragram, Snapchat has a narrow audience and appeal.  Although the brand seems to have now encorporated advertisements on different stories and has sponorsed filters, I still think more advertising can be done to appeal to different audiences.  A possible example might to be have a contest to win a pair of concert tickets to see Journey.  Snapchat users would sing different Journey songs using various filters.  This targets an older crowd and generation.

On the other hand, if Snapchat were bought out by a more profitable company, the parent company might be able to also implement new strategies that might help make the brand more successful and have a wider appeal.

I guess time will tell what the best option for the brand should be.

Student

I believe this should raise some concern for Snapchat.  Snapchat should definitely continue looking into developing more ways to attract new users and a wider more diverse audience, as should any successful company.  The app is constantly updating and remodeling the popular brand with new technology based features, partnerships, and advertisements.  However this may not be enough to keep up with the constant success of Facebook.

Student

I don't think this is the end for Snapchat but a time for major improvement. Snapchat should start looking into another audience such as Generation Xers. This is a market they have not yet penetrated from personal observation. Although Gen Xers know about the application they are not frequent users. Advertising to them in a way that connects with their demographics would hopefully be a big help to Snapchat. There are plenty of other options to get Snapchat creating more profit. One option could be having users purchase a subscription to the app. The company spends much of its revenue buying cloud-computing power which is how they handle the millions of snaps being send every day. Revenue from a subscription could help to grow more revenue but it could also make them worse off than they already are because many people don't like to purchase apps. In that case, it might prove beneficial to Snapchat for someone else to take over. 

Student

I do think Snapchat is losing traction in its current model. In their IPO filing they did acknowledge that profitability is not feasible as they transition into becoming a "camera-technology" company.The advent of Snapchat Spectacles will go down as a marker for Snapchat's transition from social media app to tech company. I don't believe that Snapchat sees itself as a longterm social media app, I think that they aspire to become Google-esque. 

Student

I do think that snapchat is in risk of being purchased by a larger more powerful company, similar to when Facebook bought Instagram in 2012. I do no think that this is the fall of Snapchat for it is still a heavily used social media platform that has just within the last year started encorporated advertisements, which can become a consisten revinue to whomever own's the social media app. I think that with consisten updates, the always entertaining filters, and the recent fall of the popular social media app Vine, Snapchat will remain a staple within the millenial generation.

Student

 

Even though Snapchat lost $514.6 million in 2016, it is still one of the most widely used platforms across children under the age of 25 (millennials). Going public might just be the right thing for Snapchat to do at this point if they are trying to make more money, but a value at $25 billion surprises me due to the amount of money that they lost last year alone. I do not see Facebook buying this company, due to the people they target being mainly adults, it just wouldn’t be a good fit. On the other hand, if a larger company that agrees with the target audience that has the budget to purchase such a large company such as Snapchat, I think they might be able to get it at a lower price if they buy sooner rather than later, again considering the amount of money they lost last year.

Student

I think this means Snapchat is losing attraction of people. As far as I think, Snapchat's user range is narrow compare to other social networks like Facebook or Twitter. Most of Snapchat users are young people and when they lose attraction of one, they are ready to move to some other app that can attract them. Personally, I don't use snapchat because the app appeals nothing to me. I can save my memories with my camera not through the snapchat or on their server. Also, I think they should be acquired to other profitable company because they have lost enough money with current leader.  

Student

I do not think this is the end of snapchat as when I ask friends which platform they use o socialize its primarily Snapchat. I think their issue is the way they advertise. The click though rates are probably very low a you an sip right over ads and they only happen during public stories. If they find new ways to incorporate ads within the app I feel like they can increase their profits. 

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