Snapchat must do more to prove its worth to brands in the wake of its IPO filing, with marketers suggesting the platform is too restrictive and fails to cater to a mass audience.
On Friday (3 February), Snapchat filed for a $3bn IPO. As part of the filing, the company admitted it faces challenges convincing advertisers over the veracity of its ad business.
The filing highlighted that while revenues came in at $404.5m (£324m) last year, up from $58.7m (£47m) in 2015, its net loss widened to $514.6m (£412.2m), from $372.9m in 2015. User growth is also slowing.
Snapchat’s user base grew by 50 million daily active users in 2016, but that growth slowed considerably at the tail end of the year. And after averaging more than 15 million new daily active users through the first three quarters of 2016, Snapchat added just five million new users in the fourth quarter.
Snapchat has admitted advertisers “may view some of its products as experimental and unproven”, but the problems don’t stop there. And despite Snapchat’s vice-president of content Nick Bell previously claiming Snapchat’s audience is “not as young as people think,” some marketers are failing to get the memo.
“Snapchat remains a bit of an enigma for many people over 25. I think this is changing but potentially not at the rate we’ve seen with other channels,” says Angela Bertram, senior social media and content manager at Dixons Carphone.
A “key blocker” to more brands using Snapchat is the user interface and the complicated process to building a community in the app, according to Bertram. She says Instagram prompts users to follow friends from their Facebook community so users feel like their content is being seen by a wider audience; this is something Snapchat cannot compete with.
Snapchat must also deal with the fact that its stereotype of having a younger demographic is not only putting marketers off but that this specific audience is also perceived as difficult to get money from.
Rather tellingly, brands including Skoda and Made.com don’t even use the platform yet, with the adult driver-focused Skoda saying it hasn’t once come up as a possible ad channel.“We’ve honestly not given it [Snapchat] any thought yet,” admits Kirsten Stagg, head of marketing at Skoda UK.
Bill Fisher, senior analyst at eMarketer puts this lack of brand focus down to Snapchat’s younger user base.“Until Snapchat can grow its user base outward from these core demographics, it may find it hard to prove its credentials to anyone other than the brands looking to target young consumers,” he explains.
Snapchat remains a bit of an enigma for many people over 25.
Angela Bertram, Dixons Carphone
Brands including L’Oréal and media agency WPP are increasingly using Snapchat. WPP claims it spent $70m with Snapchat last year, while L’Oréal has worked with Snapchat to create sponsored filters resulting in some “impressive engagement”.
Yet that $70m figure is some way behind the hundreds of millions WPP spends with Google and Facebook. And L’Oréal, meanwhile, says the platform still needs to “ensure” brands can reach different audiences.
Snapchat is also at risk of falling behind its competitors. Samuel Budd, commercial director at social media marketing agency Social Chain, says Snapchat has missed a trick in making it easy for audiences to connect with their favourite brands through its business options.
“When we compare Snapchat and Instagram and the impact both are having across our own communities, it is clear to see that Instagram is continually delivering far greater results for our clients,” he reveals.
Instagram’s move to Stories – which has matched Snapchat’s 150 million active users in just six months – is not the first time Snapchat has been threatened by social platforms copying its features. Smaller platforms including Snow and Musical.ly have also adapted its features.
As a result, Snapchat must remain innovative and provide marketers with a link to their desired target audience to stay ahead of the pack. If it doesn’t do these two things then brands such as Skoda and Made.com will continue to look elsewhere.