Random Blog Post: Unprofitable Social Media
This past Thursday, Snapchat, Inc. (SNAP) closed down 6%. This resulted in a decrease in market cap of about $1.3 billion. Rumors have been swirling that this may have been a result of Kylie Jenner's tweet asking "...Does anyone else not open Snapchat anymore?" Jenner tweeted this because she, like many other users, was extremely disappointed in the app's new interface update. Whether or not the 6% was attributed to Jenner's tweet, it is still apparent that she had some impact on the poor day for the company. This whole situation is an example of what is wrong with Snapchat and other technology startups, which may have gained a large user base, but do not have a profitable or sustainable revenue model.
For the most part, I consider myself anti-social media. Constantly, I try to convince myself to delete all of my accounts and leave the social media world. However, I still have Facebook, Twitter, Instagram, and Snapchat like a majority of people my age. Despite rarely using them or posting, I check most daily at a minimum. The goal of all apps today is to ramp up their user base and hope they can eventually turn profitable. Outside of Facebook (the owner of Instagram), which has billions of Monthly Active User's and has managed to become a news and advertisement platform comparable to Google, none of these apps will be able to turn a sustainable profit. The fundamental issue is that no matter how many Snaps or Tweets I post a day, those companies are not gaining incremental revenue. They are banking on celebrity sponsorships and the chance that enough people will click on banner ads, which don't even interfere with the platform. In fact, the ones who are profiting on these apps are celebrities, like Jenner, who are paid to promote nearly anything. Until Snapchat and Twitter can find a way to monetize incrementally for the amount of Tweets, Snaps or time spent on the app, investors will continue to be swayed by things as trivial as one celebrity tweet or one unpopular update.
For the most part, I consider myself anti-social media. Constantly, I try to convince myself to delete all of my accounts and leave the social media world. However, I still have Facebook, Twitter, Instagram, and Snapchat like a majority of people my age. Despite rarely using them or posting, I check most daily at a minimum. The goal of all apps today is to ramp up their user base and hope they can eventually turn profitable. Outside of Facebook (the owner of Instagram), which has billions of Monthly Active User's and has managed to become a news and advertisement platform comparable to Google, none of these apps will be able to turn a sustainable profit. The fundamental issue is that no matter how many Snaps or Tweets I post a day, those companies are not gaining incremental revenue. They are banking on celebrity sponsorships and the chance that enough people will click on banner ads, which don't even interfere with the platform. In fact, the ones who are profiting on these apps are celebrities, like Jenner, who are paid to promote nearly anything. Until Snapchat and Twitter can find a way to monetize incrementally for the amount of Tweets, Snaps or time spent on the app, investors will continue to be swayed by things as trivial as one celebrity tweet or one unpopular update.
I think a barely unbeatble competitor might be the reason for Snapchat failure. Since instagram introduced ins story feature, snapchat stock value has decreased constantly. Snapchat story function is too easy for big company to copy, for example instagram. As instagram also have a huge consumer base and strong supporter behind it（facebook), it is no surprised to see it is decreasing right now.
ReplyDeleteI read about the Kylie Jenner tweet on Forbes the other day. It is so crazy. Snapchat seems to have failed with this current update. It will be interesting to see how future changes of the app will affect them.
ReplyDeleteI also heard about how Snapchat's stock plummeted $1.3 billion after Kylie Jenner's tweet. It amazes me that with just a few taps at her phone, Kylie can shake up the tech world. Apparently she also indirectly helped Facebook, the competing app of Instagram. After her tweet, Facebook's stock closed on Friday up $13 billion from where it was before Kylie's tweet!
ReplyDeleteThis comment has been removed by the author.
ReplyDeleteCelebrity endorsements are becoming more and more important for social media companies. It's crazy to think that a celebrity snap could impact the company's stock that much. Despite the decreasing profitability, I don't think these platforms are going anywhere soon.
ReplyDeleteIt's crazy how easily Snap Chat is effected by one wrong update and celebrity opinion. Like most users, I myself am very unhappy with the update. Aside from Jenner, I've seen a lot of other celebrity figures express their dislike as well. It will be interesting to see how they decide to respond to the negative feedback.
ReplyDeleteIt's crazy to me how Kylie Jenner can have such a huge effect on Snapchat stock! I do remember seeing on my Facebook newsfeed arguments over whether or not Stnapchat's stock was overvalued and just happened to crash at the same time as Kylie's statements or if Kylie really did have an actual impact on the crash of Snapchat.
ReplyDeleteI have always heard about the Kylie Jenner tweet. I believe that instagram stories just ruined the point of snapchat because now people can just use one social media platform instead of two. I think facebook is now turning into more of a networking platform. Some snapchat employees who are friends with my sister told me they are now a messenger app over a social media app. I think snapchat will never gain the same popularity it once had because of instagram and the new update.
ReplyDelete