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2/3 of value lost in 18 months: future of Snapchat doesn’t look good

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What is Snapchat’ future? Will Snapchat still be alive in 5 years from now?
In the light of the latest financial results investors can be doubtful. We predicted this downturn 3 years ago when most people were seeing Snapchat as the next Facebook, the best social media to capture the attention of the younger generations.

Snap Inc. has lost 2/3 of its value in 18 months

Snap Inc., the company that owns Snapchat, was introduced on the stock market in early March 2017 at 17$. When the market closed on that first day the price of one share was 27.09$. On 7 September 2018, for the first in the -short- history of Snap Inc., the share closed below the symbolic price of 10$. At 9.93$, Snap Inc. has therefore lost two thirds (64% precisely) of its value in a mere 18 months.

Why is Snap loosing so much value ?

The main reason why Snap is losing so much value is that it fails on realizing investors’ expectations in terms of revenues (and profits of course). The expectations that Snapchat would allow brands to target the younger generation (mainly the 14-18) remains largely unsatisfied. In fact Snapchat is losing subscribers: it has lost 3 million Daily Active Users (DAU) during the 2nd quarter of 2018. Moreover brands prefer to onvest their money to advertise on other platforms like Facebook and Instagram.
The other “mass-product” of Snap Inc. called the Spectacles (connected glasses to post stories on Snapchat) wasn’t really a success (220,000 pairs sold worldwide) and the newest version launched earlier this year (the Spectacles 2) were priced even higher and are unlikely to be successful either.

What’s the future of Snapchat?

At this point in time, given the latest information available, we might expect the Snapchat bubble to burst completely. We believe this social network has no sustainable business model and will not become profitable.
There are therefore two options:

  1. Snap Inc will run out of cash and cease operations
  2. (the most likely option) it will be taken over by another company that would have a genuine interest in its subscribers.

If the latter doesn’t realize quickly (because Snapchat is losing subscribers) option 1 will then become the most likely.

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Author: Pierre-Nicolas Schwab

Pierre-Nicolas est Docteur en Marketing et dirige l'agence d'études de marché IntoTheMinds. Ses domaines de prédilection sont le BigData l'e-commerce, le commerce de proximité, l'HoReCa et la logistique. Il est également chercheur en marketing à l'Université Libre de Bruxelles et sert de coach et formateur à plusieurs organisations et institutions publiques. Il peut être contacté par email, Linkedin ou par téléphone (+32 486 42 79 42)

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