Friday, July 21, 2017

Snapchat’s Double Edged Sword

Snapchat’s acquisition of the location data company Placed in early June shows the company is getting serious about attribution.  While Snapchat has robust location data on its 166 million daily active users, Placed’s ID graph, which collects geodata on a panel of 150 million opted-in mobile devices, broadens those insights to people who don’t use Snapchat and age out of its core demographic and because Placed measures channels beyond mobile, Snapchat will gain insights on how its audience behaves across platforms.

In April, Snapchat debuted its attribution capabilities with the roll out of Snap to Store, a tool that attributes footfall in retail locations to ads on its platform. The addition and incorporation of Placed’s ability to attribute ad exposure to purchase data on its panels of users, along with its 270-plus proprietary relationships with brands and retailers, Snapchat presumably will be able to go the extra step in attributing those ads back to purchases. The potential to perform purchase attribution is a “big plus” that could help Snap attract more direct-response advertisers to its platform

This blogger finds this corporate pivot to be a bit contradictory to the allure Snapchat to its core user base – privacy. During the valuation and IPO process this was always something that I found confusing – how does a service that champions privacy monetize the user data it collects.

I for one do not understand Snapchat – I guess it’s generational. I downloaded the app, but never really used it because I find it very confusing and, quite honestly, I don’t have anything to “Snap” about. This is my whole gripe with social media – who really cares what I have to say – I find people that post opinions and world outlooks annoying. However, those individuals that use Snapchat religiously, and from my understanding it has become a religion and boosts a pretty large cult following amongst the youth of America, were initially drawn to it because of the temporary nature of the messages. The other aspect of its core user demographic is their “flavor of the month” view of the world.

Imagine if a company did a volte face on the core aspect that attracted you to use its platform, how would you feel? I for one would feel betrayed, and would probably disassociate myself from said company. If I were a competitor, I would take the opportunity and step in to offer a service that championed this value (i.e., privacy) and gobble up market share – read as a great opportunity for WhatsApp, although they face a similar privacy dilemma.

I guess I’m just turned off by things that I don’t understand – and I really just don’t get Snapchat – which is disconcerting from a valuation perspective as the growth opportunities are predicated on retaining its existing consumer base and penetrating other age demographics (i.e., ME). This acquisition, which I believe is a very insightful one from the perspective of enhancing its offerings and reach to potential advertisers thereby monetizing its user base and providing returns to its shareholders, seems like a very sharp double edged sword. I seriously think that they risk alienating their core users – although let’s be honest, these aren’t the type of people who are reading the Wall Street Journal, and who honestly reads updates to Privacy Agreements – I mean you can’t use the product unless you click “Accept”. Check out the HUMANCENTiPAD South Park episode to see the consequences of not reading all the Terms and Conditions to see what those consequences could be.

I suppose only time will tell whether Snapchat’s value proposition to its user base conflicts with the manner in which it creates value for the shareholders, but as we have learned throughout the history of Facebook, privacy infringement and transparency is a slippery-slope.

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