Over the past month, Wall Street has set a negative tone on Snap Inc. (NYSE:SNAP)for one reason: they want SNAP shares as cheap as possible. Now that the allocation process is already well underway, we’ll see how sentiment turns into Snapchat’s IPO debut trading session March 2.
A lot of the people making decisions to buy stocks don’t really get SnapChat. Why would they? It’s not for them.
I’m very bullish on SNAP, so I sat down at length with Marketing Pro Dan Syckle to discuss the company. Dan is then Strategic Marketing Manager at Mediavest & Spark. He’s quoted throughout.
What is SNAP?
“People default to using Snapchat instead of their phone’s camera software. People take “Snaps”, not photos. You know your product is special–when it becomes a part of our vocabulary” – Dan Syckle
SNAP refers to itself as a camera company. It really is as simple as that.
Many people don’t understand Snapchat has become the default camera app for SNAP users. Why? It’s by far the best camera software. On top of that, you have an easily accessible network.
Snap is also entertainment. It’s something people like to do when they have free time. SNAP makes the experience enjoyable by making things fun, new and different. That’s also how SNAP makes money.
Most importantly, Snapchat is a self expression mechanism. You can make funny snaps to share with your friends or sexy snaps to share with your lover or tinder flirt. You can take your friends on vacay by showing them cool things and amazing sites or you can take selfies with fun filters when you’re farting around.
Snap as an Advertising Medium
Marketers follow the consumer. As we’ve already discussed, Snap has enormous mindshare and is a very unique experience/property.
Marketers are already using Snapchat in different ways, but it seems like it is just picking up steam… Millennials want brands to go beyond entertainment by offering customized experiences that make them feel a part of the conversation and intertwined with the brand…Snapchat offers a different type of experience to consumers and marketers. – Dan Syckle
This all fits in a basic larger Millennial/Gen Z marketing trend. From the Washington Times:
What is more authentic than documenting your experiences?
Competition
Whenever it comes to social tools, people like to say ‘Facebook can just copy that’. While they can, they cannot just so simply change their image and who they are.
First, let’s just point out kids realize that Facebook will never let your account go away. Facebook wants your information and your data ’till death and beyond.
Naturally, people don’t like that. Particularly kids trying to hide from their parents. They understand any app associated with Facebook, including Instagram, is ‘on the record’. ‘On the record’ is full of discomfort and pressure to collect likes, favorites and be PC.
SNAP on other hand, is much more care free. If your jokes aren’t funny oh well. If you want to save some pictures, that’s great, you can upload it. Otherwise these pictures and one time jokes disappear. Snap even makes it a point to let you know if somebody screenshots any picture you send.
This perception…this trust is very important and intangible.
Immense Skepticism
A lot of people are asking ‘How does SNAP make money?’ Remember the last time we heard that about a ballyhooed social media IPO?
If you’re wondering, here’s the answer:
Snapchat’s sponsored lenses are expensive (ranging between $250-$450K per day), but they offer a brand the opportunity to give the consumer an experience while still integrating a product and a message into their lives. Each person who takes a snap with a branded lens and then shares it with friends essentially becomes a mini brand ambassador whether they know it or not. The same goes for the more affordable geo-filters. – Dan Syckle
Display ads are an advertising mechanism of the old guard. Snap still uses them…and THAT is where things get murky.
“Marketers are also using display ads, which have long been known as the bread and butter of the digital advertising industry. This is the part that truly worries me about Snapchat. Users are conditioned to tap through snaps quickly and often recognize display ads and dismiss them immediately. As an advertiser, it’s a little unnerving knowing that so many of your ads will go almost completely unseen. This is just a product of Snapchat’s environment.” – Dan Syckle
Snapchat and the entire industry will have to find ways past this. There is no way around it. People will not tolerate endless display ads forever. This is going to be a HUGE transition over the next 5-10 years.
To Snap’s credit, they let users immediately click past a display ad. That’s another sign they care greatly about user experience.
To recap I’m bullish on Snapchat’s IPO (SNAP) for a few reasons:
- Pessimism– It’s rampant. Yes there is uncertainty, but there is always uncertainty. People are always skeptical of things they don’t understand.
- User Base – Users love Snapchat. Snap owns significant mindshare. Advertisers will throw money at Snap advertising as long as the user base is strong. Snap has pricing power. That makes the uncertainty very tolerable.
- Competitive Advantages – Snap is a currently a unique asset. The old guard (Facebook) is caught up in old marketing. They want your data. SnapChat cares about user experience than anything. That only strengthens the loyalty of their user base (Similar to Amazon, no?)
- The main difference between SnapChat and all other social networks is you actually find joy using it. On Facebook you get annoyed with friends. On Twitter you get annoyed with strangers. SnapChat is just fun and interesting.
I’ve heard up as high as $40 billion for Snap’s Opening. That is rich, i’m not paying that much. $20-25B is a steal. Congrats if you got in on the IPO.
Thanks for reading and good luck out there.
Twitter: @ATMcharts
Any opinions expressed herein are solely those of the author and do not in any way represent the views or opinions of any other person or entity.
