2. Why did I pick this product and company?
Social media is a big aspect of our current society and it is mainly used for
advertising a product or service. Snapchat caught my attention because it has been here
since 2011 and it is still so strong, compared to other platforms that rise and fall quickly.
For example, Phhhoto the app that is described as an “instant animated camera,” used by
over 10 million people, yet it only lasted 3 years (Mobile World, 2017). I am interested to
see how snapchat still remained relevant to our society, regardless of the number of years
it has live.
Background Information
Snap Inc. (originally, Snapchat Inc.) is a camera company based in Santa Monica,
California that focuses on the way people live and communicate. They contribute to the
human progress by empowering every individual to express themselves, live the moment,
learn about the world, and have fun together (Snap Inc, 2021). The company’s main
product line is the Snapchat app; however, it has 2 additional products. Spectacles are
sunglasses with a built-in camera that captures 3D imagery and videos at 60 frames per
second (fps). The second product is the Bitmoji app where you can create your own
avatar/emoji.
In the fourth quarter of 2019, Snap lost $241 million on 560.8 million in revenue
that’s up 44% year-over-year and an Earning Per Share (EPS) of $0.03. That comes from
adding 8 million daily users to reach a total of 218, up 3.8% this quarter from 210 million
and 17% year-over-year (Constine, 2020). The company has $4.12 Billion in total assets
and $2.26 Billion in total equity.
3. The Snapchat app was initially developed and released in 2011 by Evan Spiegel,
Bobby Murphy, and Reggie Brown with the name of Picaboo as an iOS-only app.
However, by 2012, Reggie was forced out of the company and Spiegel and Murphy re-
incorporate as Snapchat. Now, Barry Eggers agrees to invest $485,000 to snapchat, after
learning from his daughter the three most popular apps, within them, Snapchat. In 2013,
the app was hacked by an anonymous group, which revealed the personal information of
4.6 million users. The company apologized for the hack and repaired the breach and hasn’t
had a major security incident in seven years (The Street, 2020).
In 2014, Snapchat rolled out Snapcash, a money transaction feature which enabled
site consumers to send and receive cash from other users, and have it deposited into their
bank account. Furthermore, the app extended its reach into the financial realm with
Community Geofilters. Now, users were able to generate their own Geofilters or simply
buy branded filters for their own use (O’Connell, 2020).
Customer Segments
Male & Female 18-24: This is the main and largest demographic of Snapchat. This
specific age group adds up to 73% of it’s total users. 59% of the snapchat users are
female and 39% are males. The psychographics of tis segment are individuals that
are social, creative, values time with friends and family, aware of trends, tech
savvy, etc.
Some additional demographics are that 25-30-year-olds make up 47%, 30-49 take
up 25%, 50-64-year-olds add up to 9% and 65+ make up for 3%. (Chen, 2020).
According to Sprout Social’s Social Media Analytics, these demographics state that
29% of these live in an Urban Area, 20% in Suburban and 20% in Rural. Out of all
4. of the previous mentioned statistics, 22% of users have a high school education,
29% have some college education and 20% have more than a college degree.
Value Proposition
The Fastest Way to Communicate: Snapchat prides itself by stating their motto to
be the fastest way to share a moment. This tells the consumer that in a matter of
seconds your message or picture will reach a large number of people, which is an
attractive feature for the target audience (Snap Inc, 2021).
Individuality and Expression: Sharing videos and pictures of your day-to-day is a
great form of expression, however, snapchat furthers it through the built-in lenses
and filters within the app which allow individuality to be explored much more
(Gotter, 2020).
Learn About Your Community and the World: The app has the Discover feature
that showcases user and professionally generated content. The snapchat map is
structured in a specific way that organizes the content geographically.
Memories: Even though the app is known for the 24hr-only story, the user is able
to save the video and/or picture taken to the memories section. As time progresses,
the app reminds you of those memories upon reaching the year mark. This fosters
the emotions of gratitude and happiness to the user, since if may remind them of a
time they may have forgotten.
24/7 Entertainment: Due to the vast number of users, content is created daily and
at any time of day. This allows the user to be involved in the Snapchat community
more and inspire ideas.
5. Effective Advertising: Due to the reachability and the 191 million active users,
advertising a product and/or service is much more effective. Daily users spend
approximately 30 minutes a day within the app. Furthermore, it can help the user
reach a new audience (Gotter, 2020).
Channels of Distribution
iOS & Android Market: The main channel of distribution is the Apple App Store
for iOS and Google Play Store for Android. Snapchat is free to download.
Snapchat Website: The site is merely used for informational purposes only. In the
careers section there is a broader explanation on the brand and their products.
Customer Relationships
Community Driven: Once the app is downloaded, users will register directly from
the app. This is primarily community driven since the users create stories and snaps
that last 24hrs. 191 million users are the force that keep the app up and running.
Social Media Updates: Snap Inc. connects with the users through their official
website by hosting a Community Section. They discuss guidelines, technical
support, and safety tips. Also, the company relays news and events through direct
snapchat messages, the official blog, and official Twitter account (Snap Inc, 2021)
Key Activities
Native Development: Snapchat has to go through a process of programming
languages and tools to function efficiently in the mobile OS, specifically iOS and
Android (Kim & Shokurova, 2020).
Legal Review: Snap, Inc. keeps the Terms of Service of the app up to date. Included
on these terms are the rights the user grants the company. For instance, according
6. to the Snapchat Terms of Service, “For all Services other than Live, Local, and any
other crowd-sourced Service, you grant Snapchat a worldwide, royalty-free,
sublicensable, and transferable license to host, store, use, display, reproduce,
modify, adapt, edit, publish, and distribute that content. This license is for the
limited purpose of operating, developing, providing, promoting, and improving the
Services and researching and developing new ones.” Aside from this, the Privacy
Policy is often reviewed and updated to keep users on-the-loop of changes within
the app (Snap Inc, 2019).
Security: Snap, Inc. monitors Snapchat’s usage and content published by users in
order to ensure policy guidelines are followed and enforced (Snap Inc. 2021).
Key Resources
Software: Personnel, such as app developers and specialty staff, need to have the
appropriate software to troubleshoot and update Snapchat. If not, the app could risk
malfunctions, data leaks, bugs, etc. Similarly, when we write software, we should
have some idea of why we’re doing it, and what the end goal is. (Code Simplicity,
2008).
IT Infrastructure: Aside from the first element, the IT infrastructure is vital since it
stores all of the equipment needed to monitor the content of the app, store users
saved memories, company’s backup data, and overall app management (Sumo
Logic, 2021).
Patents: Snap, Inc. has more than 15 registered patents, one of which is content
collection navigation and autoforwarding. According to the abstract, this applies
7. to “Systems and methods for communicating and displaying collections of image
and video clip content are described” ("Patents assigned to Snapchat, Inc," n.d.).
The company has to keep track of their patents in order to avoid companies from
committing patent infringement.
Corporate Lawyers: They advise the company concerning their legal rights,
obligations, and privileges. They act as agents of the corporation in various
business transactions and seek to help clients avoid expensive litigation. In this
case, advise them of the patents and copyright claims (Vault, 2021).
Technical Support Specialists: they work with end-users to provide support and
assistance for technical, software and hardware problems. Some of the more
common problems they troubleshoot include connection problems, slow
performance, inabilities to access data and inefficient programs. When it comes to
App technical support, they identify bugs and malfunctions mentioned by users and
prepare a ticket to get the app fixed and updated (Indeed, 2021).
Key Partners
Media Houses, Broadcast Networks, and Tech companies: As part of the
application’s Discover feature, Snapchat has partnered with a number of news
outlets and publishing houses to provide users with daily news updates. These
partners include Daily Mail, Vice, CNN, ESPN, Cosmopolitan and Yahoo News.
Live Nation: This company will provide coverage of live music events through the
app to the users (Music Week, 2017). The partnership has remained strong since
2015.
8. Specialty Partners: According to the official snapchat website, their key partners
are divided into several categories, here are a few:
o Within the strategic partners you have the following:
Amobee: Helps deliver snap ads with relevance and impact
using the company’s intelligence-driven media solutions.
(Snapchat, 2021).
4C: Helps marketers gather intelligence and drive business
outcomes across closed ecosystems (Snapchat, 2021).
Code 3: a performance marketing agency focused on driving
results for brands through three essential elements of digital
success: media, creative, and commerce (Snapchat, 2021).
o Within sales partners you have the following:
Ad Dynamo: Snapchat’s authorized sales representative in
South Africa (Snapchat, 2021).
DMS: Snapchat’s authorized sales representative in Egypt and
Kuwait (Snapchat, 2021).
Influencers & Celebrities: Word-of-mouth advertising is considered to be the
most trustworthy and influential form of marketing. Influencer and celebrity
marketing on Snapchat is an effective form of word-of-mouth marketing.
Brands encourage influencers to promote their products to their fans who
believe in them, which lead to an uptake in product purchase and consumption.
A recent trend involving particularly important influencers occurs when a brand
hands over a Snapchat channel to an influencer, this movement alone has given
9. snapchat approximately 120,000 additional users (Influencer Marketing Hub,
2021).
Cost Structure
IT Infrastructure Maintenance: this is the key to ensuring business continuity.
The IT industry follows certain maintenance principles with a few variances,
and the same standards are relevant in the context of various organizations.
Maintenance is divided into 4 areas: server, desktop, backup, and security.
These practices can be customized based on the unique context of individual
organizations (Techopedia, 2021). All of this still applies to Snapchat’s routine
maintenance.
Research and Development: This focuses on the gathering of the intelligence
needed for the app algorithm and periodical bug fixes and updates.
Sales & Marketing: This covers the overall expenses incurred in the promotion
of the app, which includes the percentile given to partners and influencers.
General & Administrative: This covers salaries of staff, registration fees,
special permits, etc.
Third Quarter 2020 Results:
o Here is an overview of Snap, Inc. latest financial highlights:
The operating cash flow improved by $21 million to $(55)
million in Q3 2020, compared to the prior year. Now, the Free
Cash Flow improved by $15 million to $(70) million in Q32020,
compared to the prior year.
10. When it came to the common shares outstanding plus shares
underlying stock-based awards, it totaled to 1,624 million at
September 30, 2020, compared to 1,565 million one year ago.
The revenue increased 52% to $679 million in Q3 2020,
compared to the prior year; and the net loss was $(200) million
in Q3 2020, compared to $(227) million in the prior year.
o Snapchat is slowly adjusting; however, it is yet to be profitable.
Financial predictions of the company are confident that by the end of
the fourth quarter of 2020, the company could begin to see profitability
(Snap Inc, 2021).
Revenue Streams
Advertising: Due to the 100+ Million daily users, Snapchat has a $5 daily rate
for the basic advertising and a rate of $3,000/month in ad spend for the Snap
Ads campaigns. This does not include the agency fee, or the cost to create the
advertisement the individual wants to distribute. Furthermore, the swipe-up rate
for Snap Ads is 5X higher than the average click-through rate for other
comparable social platforms (For Business Snapchat, 2021).
Sponsored Lenses & Geofilters: The rate for this feature varies depending on
the day of the week, holiday, trends, etc. The general overview to the Snapchat
Sponsored Lenses rates are: $450,000 per day Sunday through Thursday,
$500,000 for Fridays and Saturdays, and $700,000 plus for holidays or special
events (Snap Inc, 2021).
11. Discover Section: This is the most expensive feature snapchat has to offer. The
start off daily rate is $50,000, and it provides premium placement. These are
commonly used by big brands and publishers. This rate was initially $750,000,
however, the company reduced it due to the feedback received (Investopedia,
2021).
Conclusion
Snapchat is a company that has remained relevant in this ever-changing industry. It
has adapted to the Gen Z mentality and has included the partnerships with influencers that
this generation is very familiar with and look up to. Aside from this, the company has
struggle to be profitable, regardless of the number of users it has. However, it has been
slowly gaining strength and predictions state that they might be profitable by the fourth
quarter of 2020. Nevertheless, they are not certain of the outcome. Snap, Inc. has to assess
their liabilities and readjust their overall business plan and model to minimize losses and
increase their chances of profitability. They have a solid foundation and the potential to be
better. The only thing is that they need to do is use it in a strategic way or else, in the next
couple of years, the app won’t survive.
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