Saturday, July 08, 2017

So this is how Snapchat makes money?

Snapchat's valuation has always been fishy to me and I'm not the only one:

However, this week I came across an article which gave me pause that perhaps Snapchat is worth more than I thought? Snapchat's demographics lean heavily towards younger people:

Now, Snapchat's sales team is hard at work trying to capitalize on its younger audience:

Maybe it's just the inner grumpy old man in me, but I've always thought Snapchat was a fad. Something that provides little added value to other tools in the marketplace but favored by the younger generation specifically because the older generation didn't use it. While this was definitely true a couple years ago, Snapchat's population continues to expand (and age). That population is at a key point in life for marketers. They're about to buy their first car, go off to college, and for the first time ever have real disposable income of their own. The Snapchat sales team's statistics make an impressive argument why if you are an auto maker with an entry-level offering vehicle, you probably should be heavily invested in Snapchat advertising. This younger demographic is at a pivotal point in their lives and at a very important time for long term brands to start to build up their loyalty. However, all this still leaves me with two large questions:

1) Niche cases like automakers trying to sell to first time car buyers aside, how much is this audience really worth targeting? Sure, Old Navy and some other clothing companies are probably very interested in targeting this crowd but can Snapchat really generate the kind of consistent digital ad revenues the likes of Facebook and Google to justify its astronomical valuation?

2) Snapchat took off in popularity specifically because it was the outsider...the app that mainstream people didn't use. Now that it is becoming the mainstream app, how long until the next generation craves for something different to use to differentiate themselves? If I were Snapchat, I'd be deathly afraid of this and buy up anyone who holds any glimmer of promise.

In the meantime, I'm not rushing to buy their stock.

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