Snapchat is on the ropes, but it’s not down and out
So Bad So Good's co-founder Alex Wain considers what Snap's eye-watering product losses could mean for the future of the platform.
This week has been a rough one for Snapchat CEO Evan Spiegel and his animated hotdog.
His company Snap Inc posted a eye-watering net loss of $443M in the third quarter. To put the sheer enormity of that figure into perspective, they lost $514.6M in the WHOLE of 2016.
To say they’re burning through cash might be the understatement of the year. As a result, their share price continues to go from bad to worse, limping to just $12.33 from a high of $27.09 in March when they first went public.
Now remember their much-hyped Spectacles product?
They were smartglasses that were able to record short video segments, which could then be uploaded to your Snap account. Think Google Glass but way cooler.
People were queuing for hours all around New York desperately trying to get a pair. They even collaborated with fashion icon Karl Lagerfeld on the design. For a few weeks in November 2016, it seemed they were without a doubt the hottest accessory of the year.
On Wednesday they admitted they lost a staggering $39.9M on them.
Spiegel’s explanation: “We were very excited about Spectacles and by the initial reception, and because we were so excited I guess we made the wrong decision based on the early traction and ordered a lot of long-lead time parts. Ultimately weren’t able to sell as many Spectacles as we thought we’d be able to based on the early adoption.”
We’ve all make mistakes, but ordering $40M worth of useless stock certainly has to be one of the more erroneous in recent times. But the bad news doesn’t end there.
Snap’s supporters will point to the fact they 178 million daily active users, but they’ve only managed to attracted 4.5M new ones this quarter – not exactly the rapid growth rate investors were expecting. But aside from bleeding money, anaemic growth and being overzealous with their eye-wear orders, the real concern for Snapchat is the unrelenting and continued success of Insta Stories.
Since launching in late 2016, the feature now has 300M daily active users, dwarfing Snapchat in less than a year. Most worrying of all – Zuckerberg’s platform shows no signs of slowing down.
In truth, it’s hard not to feel sorry for Snapchat.
They burst onto the scene with unique product that fundamentally shifted the way millions of individuals interacted with one another. That innovation lead to the creation of a new type of medium that was adored by teenagers for its minimalism and randomness, yet baffled and confused adults with its opaque UI and novelty filters.
Snapchat felt different, it felt vibrant and above all it felt like the creative platform the internet had long been calling out for since the demise of Vine and MySpace.
Ultimately if you want to attract advertisers, publishers, content creators and keep investors happy – you’ve got to have scale. Snapchat’s stubbornness to reduce its steep learning curve turned away generations of potential users who simply couldn’t figure out how to use it.
But the real sucker punch has been Instagram’s shameless copy of Snaps key story feature. It has single handily halted Snapchat’s rise dead in its tracks. Instagram was already a wildly successful platform in its own right, now it had successfully adopted the core functionality of its competitor too.
If you’re Team Zuckerberg, eagerly leading the charge for being as unoriginal as possible, it’s certainly cause for celebration.
In less than a year they’ve effectively kneecapped a competitor in the most spectacular way possible – by shamelessly copying and pasting their ideas and features on an almost daily basis. Originality and innovation have been trumped by functionality and reliability.
Snapchat’s numerous quirks (searching for friends is time consuming and a lack of tangible insights frequently frustrating) are unquestionably part of its character and charm, but they aren’t ideal for a platform with such lofty aspirations.
With Insta Stories Zuckerberg has given users have an infinitely cleaner, simpler and frankly better platform to share and create content. Sure it’s a copycat, but it’s also an improvement in virtually every aspect. If this fascinating battle between the two tech companies were played as a game of chess, Zuckerberg would gleefully be yelling ‘CHECKMATE’ across the table right now. Any attempted move by Spiegel instantly countered, copied and cloned.
But Snapchat might have one final trick up their sleeve.
Rumours are circulating that they are hurriedly redesigning their interface to make it infinitely more user friendly and accessible. It’s set to roll out before the end of the year. After all, you can’t hope to take on the giants of the internet with only 178M teenagers uploading selfies and hotdogs all day. If they are to have any realistic chance of breaking free from Instagram’s choke-hold, Spiegel and his team need to expand Snapchat’s audience and quickly.
Do that and maybe, just maybe they can mount the most unlikely of comebacks. After all, those who value a connected world that isn’t entirely dominated by Zuckerberg’s tentacles should keep their fingers crossed for Spiegel and Snapchat.
They’re going to need all the luck they can get.
Alex Wain is the co-founder of So Bad So Good and Nothing Cooler.
