Snap, Inc. is the current social media darling, and it is reportedly preparing an IPO that will value the company at around $25 billion. Say what? Hard to believe that Snapchat was unheard of just five years ago. This company has certainly done many things right. Despite the fact that a company representative declined to comment, The Wall Street Journal is reporting on a March offering. Unlike Twitter, Snapchat is apparently reeling in more money than it can count.
What about the competition?
Sure, Snapchat is somewhat of a rival to Facebook and other tech monoliths. Nonetheless, they are positioned for massive growth in ad revenue over the next few years--this is according to a recent forecast from eMarketer. The research firm predicts the messaging app will garner $366.69 million in ad revenues. If you think that's a whopper, brace yourselves, because it is expected to jump to $935.46 million by next year. “
Advertisers are attracted to Snapchat for its broad reach among young Millennials and those in Generation Z, which are valuable demographic groups for many businesses," said Cathy Boyle, principal analyst at eMarketer. Snapchat went after the easy-to-forget demographic, and it worked. “To engage those often hard-to-reach consumers, Snapchat has expanded its advertising portfolio over the past year to include a wider array of video ads and more sponsored geo-filters and sponsored lenses," Boyle added.
Do ad revenues matter?
Absolutely! In fact, Snapchat’s Discover feature generates 43% of ad revenue, which is its largest single share. Currently, Stories generates 37% of the company's domestic ad revenue. eMarketer expects Stories to overtake Discover by next year. Snapchat launched its ad platform in mid-2015. To date, it captures 2.3% of social-networking dollars. Google, Facebook and other social networks thrive on ads. Why do you think they are working so hard to get rid of ad blockers? Ad revenues are their bread and butter.
Snapchat continues to experiment
It seems that Snapchat is testing new devices and features. It recently launched Spectacles--which, are video-recording sunglasses expected to retail for $130. They will be for sale this fall, and the glasses can record 10-second video snippets. It also has a 115-degree lens that can record circular video.
If consumers like Spectacles, then Snapchat will be the first company to successfully convince users to wear connected gadgets on their face. Google tried and failed with Google Glass, where they wanted to charge $1,500 per piece. Plus, they didn't look very appealing. If Spectacles are stylish and fun, they could very well become a phenomenon.
Snapchat formed a bond
Like other tech giants, Snapchat has a strong bond with young consumers. This is critical for starting trends. Soon, people tell their friends, who tell their friends. Before you know it, the trend spreads like wildfire. In addition, Snapchat has made other small acquisitions in the area of consumer electronics. I wonder where else they're going with this?
Snapchat is the platform that seemed to be an overnight success. What can other software platforms learn from the creative, engaging and fun platform? They must learn that it is critical to spot a trend. Before Snapchat, social media was already a popular platform for direct communication and instant reactions. Snapchat took that to the next level by setting up an expiration date. We were then reminded that, if we don't visit the platform daily, we won't see what our friends are posting. Genius.