Saturday, March 18, 2017

Original Programming is a Bad Sign for SNAP

Digiday reported this week that Snapchat is pitching original shows to advertisers, which the newly IPO'd company will sell ads and sponsorships against. The article positions Snapchat in a favorable light, saying that “advertisers are listening” and that “presented by” sponsorships are selling for low 6 figures. Despite the positive coverage, the fact that Snapchat is moving into original programming is a bad sign, especially for the bulls who liken Snapchat to Facebook and Google and are driving the valuation as such. The stock has plummeted since my most recent call, and will continue to do so.

Rolling out a product like original programming is a move toward being a publisher, rather than a social medium. Snapchat is moving more in the direction of Twitter ($11b valuation) and even a digital content company like The NYT ($2b valuation), rather than a company that rolls out highly automated ad product based on user data (rather than programming). Facebook and Google have skyrocketed by implementing systems that collect troves of data, and deploy automated advertising leveraging that data. Snapchat seems less intent on achieving that business model than bolstering its publisher platform, with this recent move. It seems as though they are shying away from newfound competition from Instagram (stories), and disappearing messaging from Facebook, and differentiating by producing original content.

Having witnessed the challenges of monetizing digital content, whether by selling the rights to read it, the content itself, or advertising against the content, I’m wincing at these types of moves by Snapchat, and remain convinced that its stock is significantly overvalued.

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