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Snap, Crackle, Pop

Snap's initial public offering is testing the patience of investors in many ways. From an unprecedented offering without any voting rights, negative cash flows greater than revenue, restricted share units taking most of current paid in capital, slowing user growth, and a valuation that makes all other social media IPO's blush, the risks are material. Those are just the financial risks. Snap is positioning itself in the marketplace as a camera company to a dedicated and narrow base of users that are fickle to fads. In a page out of a business school textbook, it is arguing that its sustainable advantage is not based on its network of users or its technology, rather Snap is a creative platform where users express themselves through video. Time will tell whether it is the fad of the moment at the peak of the equity market or an enduring creative brand.


Platform to success. Like other entrepreneurs, it wasn't the initial idea that would lead to their success. Snap started as Picaboo, where it was positioned as a sexting app that had little interest to anyone. As necessity is the mother of invention, and sometimes legal battles, they changed the name to Snapchat and re-positioned the app as a social platform with disappearing photos. A feature that people didn't know they needed until it was too late. Success soon arrived as usage took off with young women in high school and university. Certainly, the age group was primed for using their mobile as a multi-purpose communication tool.

In an evolution away from their roots, Snapchat offered Memories last year, a collection of pictures that reside online and permit sharing later. While a move away from their original value proposition, they need to make users sticky to their platform beyond just the social network. Of course, other platforms have the social network and the disappearing pictures and videos as well.

Snap's current incarnation views itself as a camera company, and not as a social media platform. Of course, this aligns with their push into eye-ware as cameras with Spectacles. They are certainly a more stylish product than the other mobile camera company. Combining Spectacles with their new Stories platform permit their users to retell their events with ease and takes them a step away from the ubiquitous cell phone as the hardware source.

Uniquely created. In the search for differentiation, there is nothing greater than the uniqueness of the individual. Snapchat is focusing on the ability for users to express themselves through media in their way. Initially, it was through emoticons where users expressed themselves, but this soon evolved into an augmented reality with Lenses, no matter how short-lived. The next step was to sell the sponsored Lenses as a marketing platform for advertisers. Of course, brand stickiness may be somewhat questionable when throwing up rainbows is the principal outcome.

The uniqueness of the platform created an advertising medium that marketers want to capture and has room to grow. Snap's platform delivers the coveted Millennial market. With nearly all their revenue coming from advertising in the US, but only accounting for 2% of current social media spend, they have room to grow market share nationally and internationally. Snap's focus, however, is on expanding the time of use for users (e.g. engagement) and not necessarily the number of users.