Portrait of Snapchat as a Profitable Business: How Snapchat Shook Stigmas and Molded a Competitive Business Model
February 19, 2015|
At first glance, Snapchat seemed like a one-off novelty app. The self-destructing image-sharing app was cheeky, secretive, and short-form, not to mention convenient for teens looking for a new way to message their friends and migrate from overpopulated Facebook profiles. Regardless of it’s snowballing popularity, tech analysts and users alike never truly considered Snapchat as a competitive social network. But 2014 was a big year for Snapchat: through launching new features like Stories and Discover, Snapchat was able to not only gain traction as a profitable social network, but finally assert itself as one that’s here to stay.
My Experiences with Snapchat
It’s safe to say that Snapchat is one of the most polarizing forms of social media available. The first time I downloaded Snapchat back in 2012, I was uninterested in the idea of using it as much as I used Tumblr or Twitter. The concept was simple: take a picture (or video), choose how long you wanted the message to be available, select a friend, and send. The message would make its way to your friend and as soon as the time was up, the picture disappeared, hence the app’s quirky ghost logo.
Although I had many friends that were frequent users, the idea of sending disappearing messages and videos to friends seemed only fractionally more convenient than actually texting them. In fact, I could only think of a handful of reasons why I would ever need to send a message that would be instantly disposed of. And, as a reluctant and reserved college freshman, the reasons weren’t quite my speed. I begrudgingly kept the app on my phone, until one of their newest features catapulted Snapchat to becoming one of my favorite, most frequently used apps.
The Evolution of Stories
My Snapchat account was like a surprising little secret few knew that I even deigned to keep on my phone. But that was until Snapchat launched Stories: the new feature which allowed me to create a narrative of my day in pictures and videos that I could broadcast to all of my friends through simply tagging my story. It’s like a daily, super-informal YouTube channel, showing videos for a limited-time (24 hours or less) and exclusively to my closest friends.
Not only did Stories make it possible for me to publish content that was both personal and mundane without the burden of permanent archival I experienced on Twitter and Instagram, but it also gave me a peek into the exciting lives of my closest friends. Girls I went to high school with would post stories which were hundreds of seconds long (or, in Snapchat time, eternities), and were somehow just as entertaining and satisfying as the brief, sarcastic stories of introverted coders I met in computer labs around campus.
Most importantly, Stories finally gave me a reason to add more friends and check the app daily to see what was going on in their lives. It transformed Snapchat from being used for dirty little secrets to keeping up with close friends from all walks of life.
Stories stood as a landmark for the development and growth of Snapchat as a business; by offering other businesses advertising placement as stories in the newsfeeds of every Snapchat user, the company was able to reportedly charge as much as a whopping $750,000 for 24 hour story placement (comparatively, ESPN asks for around $408,000 to advertise during Monday Night Football).
Although the company had yet to capture meaningful analytics about the quality and reach of their ads, companies like McDonalds and Samsung still bit at the chance to reach Snapchat’s strong user demographic of over 100 million monthly active users. This helped to prove that Snapchat was well on its way to becoming an unstoppable force in the world of social networking.
The Significance of Discover
In light of the overwhelming success of the Stories feature on Snapchat, the company recently announced and launched it’s newest and potentially most profitable feature: Discover. Snapchat Discover allows users to view short-form media on dedicated channels within the app. Companies ranging from CNN to MTV to even Cosmopolitan Magazine all have dedicated channels through which they can host anything from commercials for upcoming shows to DIY tutorials and behind-the-scenes photoshoot footage. Even Katie Couric now hosts part of her Yahoo! news segments via the company’s Discover channel on Snapchat.
Discover is important because it serves as Snapchat’s first big foire into the world of in-app advertising. While offering Stories to companies served as a palate-cleanser in getting a hesitant audience used to seeing ads on their favorite social network, Discover is the main course, providing a new and different way to view news and entertainment commentaries in a short, accessible format.
It gives a more isolated foundation through which the company can fine-tune its analytics than the current, seemingly copy-paste view counts used in standard, non-discover stories. Plus, it’s a fun to use, beautifully designed way for users to access content from some of their favorite television channels and print magazines.
Additionally, Discover will serve as a convenient platform for companies looking to boost the visibility of videos made solely for online and mobile consumption, like those of Katie Couric’s aforementioned Yahoo! news segments and skits and outtakes from shows on channels like Comedy Central. As these channel buyers continue to create content more tailored to use in Discover, Snapchat becomes an increasingly influential stakeholder in the ever-changing realm of mobile media.
What’s Next for Snapchat
After being an underdog among social networks, Snapchat is finally establishing itself as a company which should be taken seriously. Just over a year ago, the tech world watched in awe as creator Evan Spiegel turned down a $3 billion offer from Facebook to buy out the messaging app completely. Now, after releasing such innovative and creative solutions to in-app advertising and content publishing, the company has been valued at around $10 billion and has successfully raised just under $500 million from excited investors.
For a company criticized for having lacked a clear business model just over a year ago, Snapchat has fought back by offering one of the most realistic and directly profitable solutions to putting the “media” back in social media. By improving their analytics and continuing to justify their channel and ad placement price, Snapchat will continue to be the unignorable yellow ghost on all of our devices.