After recently turning down Facebook's $3 billion acquisition offer, Snapchat is making moves to create revenue streams on its own. While the messaging service has acquired a huge number of users, particularly with the younger segment, it has not yet found a way to be profitable. Snapchat announced that its users were sending 350 million "snaps" daily, but has not disclosed how many unique users it has.
Is Snapchat capable of delivering enough profit to justify the rejection of Facebook's offer? Some experts are skeptical for several reasons. First, Snapchat's negative reputation for things like sexting, cyber-bullying and insider trading is unappealing to brands who do not want to associate themselves with these activities. Secondly, Snapchat's value proposition is based on the deletion of data. While it collects information such as users' email, birthday and phone number, it does not retain any additional information about customers. This would make targeted digital marketing a challenge. Finally, Snapchat has remained vague about how many and what type of users are using its service. This gives potential advertisers little visibility into the demographics they may be targeting if they were to advertise through Snapchat.
In spite of these challenges, some brands have created accounts on Snapchat for marketing purposes. Brands including Taco Bell, 16 Handles and the New Orleans Saints have created Snapchat handles and begun sending organic messaging to users. Snapchat has also introduced "stories," which are multiple snaps that are stitched together to tell a story and can be displayed for 24 hours to a user's friends. This service may be attractive to brands who value storytelling, such as media and entertainment brands.
Will Snapchat be successful? What do you guys think?
Sources: http://adage.com/article/digital/advertisers-wary-snapchat-opportunity/245293/
http://blogs.wsj.com/digits/2013/11/13/snapchat-spurned-3-billion-acquisition-offer-from-facebook/
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