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Snapchat’s recent initial public offering revealed a large amount of information for brands considering the app as a marketing channel. Snap, the parent company of Snapchat, filed a $3 billion IPO, the third largest technology company debut ever, according to Dealogic. Information on its user demographics, its outlook for the future, and how it sees itself will help brands consider if they should invest marketing resources in the app.
In the last quarter of 2016, Snapchat had an average 158 million daily active users who sent over 2.5 billion snaps a day. Its average user is between 18 and 24 years old, lives somewhere outside the United States, opens the app 18 times a day and spends a total of 25 to 30 minutes on it, according to The Washington Post.
While 18 to 24 year olds represent 36% of its U.S. daily active users, 25 to 34 year olds make up 27%, and 13 to 17 year olds make up 22%. More than half of its new daily users in the United States are over 25.
Snapchat reported revenue of $404.5 million in 2016, up significantly from $58 million the previous year. It makes $1.05 off each user per quarter. Facebook, by comparison, makes $4.83. It’s losing money and might never make money. The company posted a net loss of $372.8 million in 2015 and a net loss of $514.6 million in 2016.
Snapchat Must do More for Brands
Snapchat must do more to prove its worth to brands, argues Rachel Gee at Marketing Week. Many find both its demographics too narrow and its servicers for marketers limited. Marketers perceive it strictly as an app for teens or people in their early 20s. Many prospective advertisers feel its products are experimental and unproven. Brands find building communities on the app challenging. Many use Facebook-owned Instagram, which has similar demographics and marketing-friendly tools.
Snapchat’s user base has exploded but growth slowed lately, Marketing Week notes. After averaging more than 15 million new daily active users through the first three quarters of 2016, Snapchat added just five million new users in the fourth quarter.
Difficult to Understand for Some
Snapchat is difficult for many people to understand, at least for people over 25. Marketers are probably no exception. Snaps, the images and videos shared on Snapchat, can be viewed for only 10 seconds and disappear from the network after 24 hours (although you can save screenshots). Snapchat stories are composed of 24 hours of the image or video snaps you’ve shared.
That temporary nature of snaps could be an advantage or disadvantage depending on your goal and whom you ask. Traditional marketers may dislike disappearing images, but some say they add a sense of urgency.
Its IPO admitted the problem. According to the Post, it stated: “ “When we were just getting started, many people didn’t understand what Snapchat was and said it was just for sexting, even when we knew it was being used for so much more. We think this was because deletion by default was an unusual concept compared to what was standard at the time, so it took time for people to understand that we were trying to solve a problem that many people didn’t realize they had.” And that problem was? Marketers are still unsure.
Bottom Line: Snapchat’s IPO marks a milestone in the network’s evolution as a major social platform. The IPO includes an abundance of data brands will find valuable as they consider marketing through the app. Whether or not large numbers marketers will embrace the app is not clear.
William J. Comcowich founded and served as CEO of CyberAlert LLC, the predecessor of Glean.info. He is currently serving as Interim CEO and member of the Board of Directors. Glean.info provides customized media monitoring, media measurement and analytics solutions across all types of traditional and social media.
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