Pre-IPO, how does Snapchat's value hold up?
- Snapchat’s parent company Snap Inc. is expected to make an initial public offering of stock early in March, potentially generating up to $25 billion in paper capital in one day. Michelle Castillo, writing for CNBC, laid out a few challenges facing the social media app as it heads into more heavy scrutiny from anxious investors.
- The key obstacle highlighted in the article was whether Snapchat will be able to maintain its youth-centric audience as it matures along with early adopters.
- Also at issue are Snapchat's basic advertising model and the return on investments for advertisers. Even though Snapchat has made great strides in this area recently, it’s still best utilized for brand awareness rather than for concrete marketing goals. ROI remains difficult to prove on ads served even though actual ad units are relatively expensive compared to other social media platforms, per CNBC. The article additionally points to a lack of original content for the platform
Snapchat became the darling of the social media scene in 2016 though it remains largely unclear how to best approach it from a brand perspective, and Castillo's article highlights how pertinent it is for the app to solidify its value in order to live up to weighty IPO expectations. If Snapchat's IPO does meet the massive hype, it has the potential to provide a boost, not just to the company, but also the entire VC industry, which raised more money last year than it had since 2001 but remained wary of investing in startups in what's been seen as a cool-down period.
Major advertising industry figures like WPP head Sir Martin Sorrell have recently suggested that Snapchat, if leveraged well, could become a third major digital player to challenge the "duopoly" of Facebook and Google. WPP's spend on Snapchat recently reached $70 million, despite reports that key advertising formats like video receive low viewability and despite the longstanding issues with ROI on the platform. Many brands are extra bullish on Snapchat despite the metrics gaps because of its young-skewing audience, though, as CNBC points out, that audience may not be as hot in a few years as it matures, and especially if another attention-grabbing app offering comes along.
To Snapchat's credit, it has begun offering more marketer-friendly offerings in earnest, adding a variety targeting and measurement tools over the past 12 months, as well as new ad formats to appeal to wider range of marketers including, most recently, deep linking and lead generation campaigns.
One final challenge laid out in the article speaks to both the appeal of Snapchat for its younger users and the headache it causes marketers: its basic user interface and content model, which are both unique and highly customized for the app. Vertical video shared on the platform, for example, can only last 10 seconds and disappears after 24 hours, making it tough for marketers to recycle creative already produced for different apps or to create spots that have a real lasting impact or any aspect of sharability and virality.
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