As with Mark Twain, the death of Snapchat may be greatly exaggerated. According to new research from investment firm Piper Jaffray, the vanishing message app remains far more popular with teens than either Instagram or Facebook (META -4.13%), and the latter is fast falling off of their radar.
This spring edition of the Taking Stock of Teens survey found that 45% of those with an average age of 16 said Snapchat is their preferred social media platform, up from 39% a year ago. That's nearly twice as many as the 26% of teens who say Instagram is their favorite, and the 8% who still point to Facebook as their go-to choice. While Instagram gained three percentage points over the past 12 months, Facebook has lost a similar amount and is solidly behind Twitter.
Image source: Getty Images.
Social media blending together
Snap (SNAP -4.04%) has been under a lot of pressure from Instagram, which copiously copies the most innovative features of Snapchat. From Stories to filters, the Facebook offspring has cribbed its rival's best ideas, and many would say it does Snapchat better than Snapchat.
Imitation may be the sincerest form of flattery, but it has effected Snap's ability to grow its user base. Where Snapchat reported it has grown to 187 million daily users, Instagram long ago passed that level and today sports some 300 million daily active users and over 800 million monthly active users.
These numbers are critical as each service seeks to monetize their platform. With almost all of its revenues coming from advertising on both Facebook and Instagram, being able to supply an increasing number of eyeballs is essential. On Facebook's earnings call with analysts in January, COO Sheryl Sandburg noted that Instagram had 2 million active advertisers while some 25 million businesses had profiles on the platform, up from 15 million last summer.
Snap is also reliant on advertising, but it doesn't generate anywhere near the revenue of its rival. Where Facebook generated over $40.6 billion in revenue last year, Snap came in at less than $825 million. Yet Snap realizes if it wants to grow more and become profitable -- Snap lost $3.4 billion in 2017; Facebook had profits of nearly $16 billion -- it needs to do more.
Recently, Snap opened a storefront that, while initially selling plush toys and T-shirts, could be used to generate more revenue in the future from selling more meaningful items, like its Spectacles glasses. More recently, Snap introduced "shoppable AR," new sponsored lenses that also function as ads that let users take an action like purchase a product or download an app.
While these are similar to the types of ads Facebook and Instagram use with success, Snap risks alienating its users because they appear right in the camera, the main feature of Snapchat, and having them front and center like that could be overkill. Making advertising the purpose of the camera or a lens could turn off more users than the number of advertisers likely to be attracted by the feature.
Teens dislike ads most
A study by MillwardBrown found that Gen Z teens are already trying to block advertising from their user experience to a far greater degree than other generations. Some 69% of teens avoid ads at all costs compared to 52% of Gen Y and 43% of Gen X. They also say they skip ads 79% of the time, versus 57% and 61% for the other two age groups, respectively, because they say ads annoy them.
The app redesign that Snap got a lot of blowback on and has now reversed might have been originally made to appease these younger users because even though it segregated celebrities away from friends and family, it also walled off the commercial aspects of the app. It's certainly a learning process for Snap, and the sponsored camera lens may have been a way to smooth the ruffled feathers of advertisers, many of whom reported a sharp drop in traffic after the redesign.
Snapchat isn't going away, as the growth in its daily active users shows, and if it can find that delicate balance between finding more ways to monetize content without turning off users, it might successfully navigate those waters. Having the luxury of still being a relevant social media platform for young people means it still has some breathing room to work out these issues.
