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 think that this is the end of Snapchat, but I do think that the app could definitely benefit from being acquired by a more profitable company. Right now, Snapchat is solely marketed to a younger audience. I think that with a larger company will also come a larger range of consumers, which in turn leads to a larger profit. The idea of being able to see a quick glance into someone's life without worrying about the permanent effects (unless someone screenshots a snap :) ) could be seen as interesting to more age groups than just millenials. For example, an older audience may want to see what a day in the life of a CEO is like, but as it stands right now, Snapchat is seen as an app geared only towards younger audiences. I think a larger company acquisition would definitely help to break this stigma and increase profits.

Student

I don't think this will be the end of Snap Chat by any means but there is much to consier if the company is going to be asking for more money when they can't make up what they already lost. Snap Chat has done well for those who want something quick and nothing personal about the picture, but too many times I belive users feel regret to not having that memory forever, even if there is an option to save the photo in time that might not be the first idea. Also Facebook is the one stop place for all socail media needs. A platform like Snap chant needs to center their focus and not have too many moving parts that they lose their true image. Due to this, Facebook is much more acceptable to all ages and audiences that snap chat may never have. I believe the company needs to re-focus and stick to the core instead of adding fancy expensive features that the consumers may not need or want. Snap Chat should concentrate on their current audience and build on those users for awhile instead of expanding to different audiences. 

Student

I think that Snapchat needs to have a more profitable company purchase it because currently, the leadership it is under is making it go downhill if they are losing that much money within just one year.  If a more profitable company were to purchase Snapchat they could identify the problems that the current company has had and fix them. Snapchat is still a very popular social media source that is used by millions of people from all ages and I think that because of whatever issues the company is currently having they could get out of it by selling Snapchat to a different company that has experience in things like this. 

Student

Although Snapchat seems to be losing a lot of money, it is still widely used by college students. At least from what I can see. However, I can see why it might start moving downhill. Since Snapchat first became popular, not many huge changes have occured within the app besides basic visual changes and filter additions. The app successfully appeals to anyone from middle school to young adulthood. Many older generations however are not interested in Snapchat, possibly due to privacy issues and lack of practical use. Older adults would rather log onto Facebook and see detailed accounts of their loved one's adventures instead of short ten second videos and pictures with hardly a description. Younger rebellious people however may use the app to post short and funny videos that they may not want just anyone to see. If Snapchat wanted a wider audience, they could add more features that would seem practical and useful for an older audience. 

Student

I don't think Snapchat is doomed, but I think they need to step up their game to appeal to a wider audience to get more user. As of now, it seems like people between the ages 12 and 23 are the ones using the app. If Snapchat wants to continue to grow, they should do more advertising for their app and make it more appealing to older people. I don't really see that many ads for Snapchat anymore, which is probably why they are losing money and users. I think if they change their app to make it more appealing for a wider audience and they do more advertsing for the app, then they will see an increase in users. 

Student

Well snapshot has two problems for me.

First, few people do not want to have Snap moment. Even if they want to keep their moment, they are like to save in their own machine, not in Snapchat's server.

The other problem is a privacy issue. No matter how hard they try, every single photo, clip and GPS information are going through Snapchat and there is a risk of getting hacked just like Apple's iCloud back in 2014.


I agree majority people like snapshot features, but they need to work on these two problems as well.

Student

Although snapchat is losing money, I do not think that this app is completly doomed, due to the fact that it is becoming increasingly popular. I think that snapchat needs to advertise their app in different ways to attract more poeple, espeically older generations. Other social media platforms, such as Facebook, have attracted a wider audience of all ages, where as snap chat mainly has kids in gradeschool and college students. Snapchat should add different features to make it more appealing to everyone, for instance adding more news pages and different ways to chat. 

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

Due to the lack of advertising space on the app, Snapchat will likely be aquired by a more profitable company. One way Snapchat could try to attract new advertisers and generate more revenue would be to allow companies and organizations to have Snapchat "stories" to advertise their brands. I don't know if users would voluntarily watch the adverstisment stories, but they could try it and see if brands are satisfied with it's performance.

I personally like the discovery section of Snapchat which features different articles from companies like Buzzfeed and Cosmo. If the company can somehow incorportate the discovery page to become more advertisement friendly, they could generate more revenue.

Student

I think Snapchat needs to evaluate how other social media platforms, like Facebook, make their money. Facebook has a comprehensive Business Manager and Ads Manager platform for businesses to promote their products and services. From my understanding, I don't believe Snapchat has anything like this yet. Since any marketers are still trying to figure out how to effectively use Snapchat, Snapchat should look into building a platform for marketers to publish and view results of their Snapchat campaigns.

Student

I think that Snapchat needs to change their model to attract more advertisers. With Instagram and Facebook live feeds and Instagram stories, Snapchat may be losing its hype. I think Snapchat needs to think of a new, unique way to entertain it's users because at this point, advertisers have the option to use Snapchat or Instagram because they both feature the same methods of communication. 

Student

I think that SnapChat will need to be acquired by a larger and more profitable company like Facebook, Google, or Apple in order to survive.  SnapChat has run out of new ideas and needs a fresh approach for attracting users and advertisers, this can be accomplished through an increase in capital and knowledge of the social media world.  SnapChat was a very great idea at once but now it is being taken over by House Party, We Chat, and Facebook, they need to get scrappy and creative in order to survive.

Student

I think that Snapchat needs to find more ways to advertise. We have seen the roll out of the discover page and the introduction of ads into our stories we post. The next thing that is coming that Snapchat will need to focus on is original content. I believe that will be crucial to their success as a company in the future. The only company that I could see acquiring Snapchat is Apple. Snapchat already has a solid fan base, the key is to find those that wouldn't ever think they would need Snapchat to use Snapchat and I think they can do that with original content.

Student

This is bad for Snapchat. Snapchat must think some ways to improve, even change the way they usually did. For me, I used Snapchat for a very short time. Becuase there are many applications I can choose to replace snapchat, like Wechat, Facebook ect. If they want to insert more advertisiers to make money, that will annoy users. 

Student

I think the problem with Snapchat is that in terms of social networks, it is a much more privatized messaging app than anything. Though Snapchat stories have become much more influential over time and have attracted more users to the app, I think there is not much room for Snapchat to move forward because of the way it was originally created.

Student

I think Snapchat could be in trouble after hearing this information. Honestly, I had never thought much about it but Snapchat really is a much more personal app - unlike Twitter or Facebook - that is a lot more public. The advertisments that they have started to add to the app are, first of all, annoying and also probably not enough to keep them going. I think it is very likely that they may have to be acquired by a more profitable company eventually, unless they somehow gain a wider following soon. I hope they don't just attract more advertisers because I think a lot of their users would get really frustrated seeing advertisments when they're just trying to snapchat their friends.

Student

I think Snapchat will need to be acquired by a larger company in order to survive. Unlike Facebook or Twitter, Snapchat is used as a more personal way to communicate with friends or family. Advertisers have made more efforts to make their advertisements look less professional to gain more impressions, but people don't like advertisements in their personal communications. If Apple were to introduce advertisements in their imessage app, there would be a huge backlash. In order to gain more advertisers, they would need to change their buisness approach to be more public-friendly, but that would destroy the personal aspect of the communication platform. Plus, being more pubic-friendly would decrease the differentiation between Snapchat and other social media platoforms. For these reasons, I believe that Snapchat should consider being a part of a larger company.

Student

I have to say that I am surprised by this information. I thought that 2016 was a critical year for Snapchat's evolution and success. The public stories and Discovery page really took off and began to incorporate more and more publications and sharing snaps from news events all over the world. Personally, I have found it's new advancements to be very useful.

However, I would say that the incorporation of advertisements could be better. Right now, Snapchat users are able to skip the advertisements that appear on the Discovery page without having to watch them.  Snapchat should try an option like the pre-roll ads that are used on YouTube, where users have to watch a certain amount of an ad or all of it in order to view the content of the video they clicked on. Something like that could be very effective for Snapchat's future. 

In terms of attracting a wider audience, the most popular current users seem to be young people, but I think that's the best market for an app like Snapchat. 

Student

I don't think Snapchat will survive on its own in the next 3-5 years. I think it would be wise for Facebook to purchase the company, as they have a similar "stories" feature which is identical to Snapchat but also offers unique affordances. I've never heard of Snapchat until I attended MSU and it seems like a fad application amongst close knit communities, but doesn't offer many opportunites for global awareness. I've downloaded the appilcation once before and it was plagued with information about celebrity news that wasn't of interest or promoted buzzfeed articles that were mildly humourous. I think it has a creative advertisement approach, but how does this application appeal to all? I feel like the real struggle is keeping active users. I feel a sense of disconnect while using the application even though it appears to be an application that offers more of a "candid" style. 

Student

I think Snapchat should change the model to attract more advertisers.  As a user, I don't think it is convenient to use. It is meaningless to make pictures just show in several seconds, especially for advertisers. It is hard to ensure enough exposure to its target audience. I prefer Facebook, Twitter to reach my target audience if I am advertiser. Snapchat should cancel the time limit on advertising promotion to attract more advertisers.

Also the main users of Snapchat is Millennials, they don't have enouh money to adfford the purchase.

Student

Snapchat is fun to use because you get to interact with your own closed circle of friends. It brings a new way to message people and show cool highlights of your day to everyone. What makes it more appealing than Facebook is that the content you post is temporary and can only be seen by people you select. Because of this, it feels more private and you don’t have to worry about people really judging you or anything like that.  As a college student, it’s great to use too.

Student

This is very interesting news to see. Things seemed peachy for Snapchat when I heard their IPO with a value of possibly $25 billion. Looks like I should have looked a little more into the story. At this point in time, I do not believe there is cause for concern. Snapchat continues to grow into, in my opinion, the most popular form of social interaction through an app. With the constant updates and tweaks to the app, Snapchat continues to give its users an experience they love. In this article by The Verge, Snapchat is reported to have now surpassed twitter for daily users at 150 million. This is big for marketers looking to reach their target audience as companies have now begun placing ads into our snap stories and filters. As long as the popularity continues in an upward trend, Snapchat will be just fine.

Student

The perils that Snap faces seem pretty clear; a recent decline in its user base, declining revenue, and competition from Facebook's Instagram and copycat apps. Snaps corporate philosophy trends toward favoring its users privacy over the needed advertising revenue. These two opposing philosophies cannot coexist in a successful growth strategy.  To avoid being swallowed up and becoming Facebook Jr, Snap will have to expand its user model and attract a wider and probably older, cash liquid audience. Snap's introduction of the Snapchat Spectacles may indicate a plan to offer tangible products available through the app. Offering a hybrid of the existing model along with an Apple type product offering, may result in consistant growth. Inevitably, I dont think that Snap's revenue stream will be able to hold off being absorbed by a far more profitable company. They may be able to hide behind the puppy ears for a while, but I think an acquisition is probably in the company's future.

Student

I think one major issue with SnapChat is that its main audience is millenials who aren't as easily convinced to buy things via advertising. We are quick to skip through ads and move on to the next story. Additionally, as the daughter of a mom who attempts to be hip and use SnapChat, it is not very user-friendly for her and I have found that that is the case for most older generations. It's hard to say how they would go about doing so, but I think SnapChat does need to attract a wider audience, an audience that can be successfully targeted by advertisers. Advertsiers can be very smart though, for example if a company sends Kylie Jenner an on-trend item she will likely show it off on her snap story, and that form of advertising is more appealing than sponsored ads from SnapChat. Unfortunately, this only makes Kylie money rather than SnapChat, but if they could find a way to profit from this perspective it could be effective. All of that being said, SnapChat is such an incredibly popular platform for our generation and has been for a while now, so I don't think it is doomed, especially in the forseeable future. 

Student

Over time Snapchat has developed a strong potential. It has leaned toward the younger generation and is dominating because of it. The younger generation is driving trends in social media because we are the most adaptable, and businesses and organizations turn to us since we hold the highest buying power. Snapchat took the opportunity of creating a social site that caught the attention of millennials and is continuously growing because of it. I wouldn't say at all, that Snapchat is doomed. I would say that it is expanding. To attract more advertisers, I would recommend letting publishers post to Snapchat or have media companies posts ads. This way everyone wins!

Student

I do not think this means anything detrimental for Snapchat. They are a smaller, yet still growing media and uncomparable to Facebook. Facebook is for an entirely different (and much broader) audience. Quite literally everyone is on Facebook. Snapchat is newer and wasn't created for older generations. They have created an incredibly dynamic platform that has become a way of life for most millennials so I do not think Snapchat is going anywhere soon.

If Snapchat was bought out by a much larger, more profitable company, I think it could be seen as a great opportunity. Snapchat has huge advertising potential, they just haven't harnessed it yet. A few ideas for making it more profitable from the audience it currently attracts now: paid snap filters, paid upgrades, a variation of a popular page or feed, and encouraging businesses on Snapchat.  

 

Student

It's obviously to say that the cost of revenue for Snapchat was higher than the revenue itself. Comparing with Facebook or Instagram, the amounts of Snapchat daily users still below of those social platforms'. Initially, Snapchat focus on younger students as target audience especially high school students & college students. They might need to expand more profitable audience like working-age populations. Snapchat provides one-on-one messaging services. That's the special point. So snapchat should keep continue their model to promote users having more private interactions with friends. I personally think Snapchat needs more time to let people know about this channel. 

Student

 I think this could be a smart move for snapchat but they are going to have to change a lot of their features if they want to make more money. They could have more advertising or have people pay to have a premuim Snapchat that doesn't have any ads. Either way Snapchat needs to do something different to attract more people and to keep the interest of people currently using it. They might have trouble if they are boughten out with new ideas that could have a negative impact on their app but that depends on the future. 

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