Snapchat has never been a quiet company. From the original inception as an “ephemeral” photo sharing app to controversies over reportedly stealing the shares of a mysterious third cofounder, Evan Spiegel’s brainchild social media company has maintained a limelight in the news. Just over a month ago Snapchat went public and is now a traded stock on the New York Stock Exchange.
Since going public most people “called” the stock would dip after IPO, but as a near statistical certainty this claim has little value for projecting the long-run value of Snapchat and whether its stock will provide astronomical returns such as Facebook or die miserably like Twitter, GoPro, Zynga, and Groupon.
When Facebook first IPO’ed most people believed, a website would never be able to hold long-run value and that it would be a flash-in-the-pan. Remember that at this point Facebook had not quite built out monetization, did not have the sophisticated social media ad platform it now uses, and had not begun acquiring ventures such as Oculus or WhatsApp.
People thought of Facebook similar to trendy iPhone game or interesting blog: temporary and not a corporation.
Facebook then went on to surpass earnings estimates in every quarter from 2012-2017 except one. This incredible financial track record paired with continuous growth in earnings and user metrics proved every naysayer wrong and verified the potential of Facebook as a long-run digital community and interface. Currently, Facebook is the largest community on Earth beating every country, non-profit, and governmental organization in size.
What lead to Facebook’s eventual growth was an innate understanding of a new form of digital interaction and long-run consumer need. People needed a means of keeping track of friends, family, and acquaintances online and interacting beyond the physical world. Facebook digitized life and found innovative ways to monetize the experience.
Snapchat sits in a precarious situation as the biggest question is whether or not Snapchat’s user interface and social network will provide long-run value for its users. Currently the answer appears to be a likely positive response in favor of Snapchat’s value creation. Snapchat brings users even closer to one another than Facebook does.
Video interaction allows for friends to see friends and share with one another a form of content more ephemeral, engaging, and powerful than any string of words in a Facebook post. While Facebook will always have a place in society, Snapchat’s value is distinctly unique, whereas other social media platforms such as Twitter and Groupon simply were not doing anything interesting in the long-run.
Facebook and its subsidiary have begun attempting to compete with Snapchat rolling out similar features for stories and visual content. This is perhaps the most pertinent question for Snapchat to address in the coming years, but at least for now this competition is not necessarily lethal. Facebook has attempted to knock-off Snapchat many times in the past and the only somewhat successful version has been Instagram Stories, with every other wasting Facebook resources and dying miserably.
As Snapchat continues to grow and post user information, they will need to continue to prove they can be the visual social media network for consumers rather than Instagram Stories or any other Facebook feature. This is where Generation Z steps in as Snapchat’s most valuable asset.
Generation Z is the demographic younger than Millennials (20 and under) and is unique as they grew up on social media. Gen Z operates in a wholly different manner than other demographics due to this status as digital natives and much to Snapchat’s advantage, their social media network of choice is Snapchat.
These younger individuals know the problems that can arise from over sharing information online and have a desire for more personal interactions. This means Snapchat is currently the best means of interacting with others digitally and if this trend persists without a quality response from Facebook, Snapchat is poised to cement itself in the world of social media stocks.
With the coming quarters and years the most important factors to look for with Snapchat will be its ability to continue user growth, fight off competing user experiences (such as Instagram Stories), percentage adoption with the younger demographics, and ability to effectively monetize the platform. This last point is perhaps their most important factor as what finally convinced Wall Street that Facebook was capable of living in the financial markets was its ability to routinely pump out earnings and beat projections.
Only time will tell whether Snapchat is a Twitter or a Facebook, but if they can effectively monetize and keep the admiration of Generation Z they have a fighting chance as creating and capturing long-run value in the industry.