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This is kind of a long one, so grab a seat, a blanket, and a drink as we discuss Snap, Inc.! From an all-time high of $81.64 on 23, September 2021, Snap ($SNAP) has fallen almost 90%. They have around $4.2 billion in debt and are free cash flow negative (actual cash in the bank is shrinking). Pretty bad. I’m a user of Snapchat. It’s a nice product. I enjoy chatting with friends on the app and occasionally scrolling Spotlight for no reason other than I’m bored. They’re a fairly good actor in the social media space too. Kinda off in a corner doing their own thing while $META, $TWTR, TikTok, etc. do…not so good things. BUT THEY DON’T MAKE MONEY! 😢 In the years I’ve used Snapchat, the only method of monetization I’ve seen is ads. And the ads are sparse. Maybe some between your friends’ stories, but those are easily skippable; not even a “wait a few seconds before continuing” like YouTube. I loathe ads, so no big deal, right? …but that model is sad, even for me. I want so badly for Snap to succeed. A good actor in a space as ruthless as social media is a rare thing. A textbook diamond-in-the-rough. So what do they do? I think they have a few ways forward. First: The product is meant specifically for teens and young adults. It’s kinda socially taboo (I guess?) for adults over 30 to use it. Personally, I think that’s dumb, but it was built for teenagers, so I understand it. The target demographic makes it hard to effectively monetize: teens don’t often have disposable cash to spend on 1) advertised products or 2) a monthly subscription if one was offered. So, modify the service to make it easier for adults over 30 to adopt and run a marketing campaign to make it less socially taboo. After that, introduce a paid offering. Adults tend to have more disposable cash than teenagers, and therefore can more easily pay a small monthly subscription without worrying as much about it. Second: I listened to an episode of TWiST where Jason Calacanis interviewed an FCC commissioner about TikTok and potentially banning the platform in the US because of the risk it poses to national security. I think, because of the public’s love of TikTok, it will be wildly hard on people if it disappears. So, to prepare for that, Snap should spin its Spotlight feature into a separate app and make it more closely resemble TikTok. Make it easier to produce in-app, upload, share, and all the things that TikTok does phenomenally well. Turn Spotlight into a full-fledged TikTok competitor. It may cannibalize Snapchat itself, but users would be hard-pressed to let their streaks go entirely. Third: Just sell. I’d love to see Snap flourish as an independent company, but if neither of those options are explored by top management, selling would be the only smart business decision. Basically, I think Snap is at an inflection point. We’ll see some things happen with this near-ubiquitous company within the near future. I only hope they can figure out what to do without sacrificing who they are. #growth #longterm #pullback
Jul 26, 2021 - Jul 26, 2022
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