At some point this week, Snap, the parent company of the ephemeral messaging app Snapchat, is expected to publicly file paperwork to become a public company, having reportedly already filed in private with the US Securities and Exchange Commission.
Although there are many things we don’t know about Snap yet, including specifics of the company’s advertising model, and whether it constitutes a stable, long-term business plan, perhaps a more pressing concern is its competition. Facebook CEO Mark Zuckerberg attempted to buy Snapchat for $3 billion in 2013. After Snap’s CEO Evan Spiegel turned him down, it seems that he and his companies have been on a tear to try to replicate Snapchat on Facebook’s platforms.
Snap’s biggest threat to its business may well be the fact that Facebook, and by extension Instagram (a Facebook subsidiary), could flip a switch overnight to copy any new Snapchat features, and the hundreds of millions of users that don’t have a Snapchat account will be able to check them out in Zuckerberg’s universe first. Instagram has over 600 million users, and in August, launched “Stories,” a section of the app that almost completely mimics Snapchat’s own “Stories” section. Since then, it’s amassed 150 million daily Stories users—as many daily users as Snapchat’s entire app has amassed in five years.
Here are a few charts that help explain what Snapchat is up against with the behemoth that is Facebook and Instagram.
Snapchat has proven to be sticky for its users, with most of them checking the app every other day in a month, according to data compiled in late 2016 by SurveyMonkey Intelligence. Snapchat has a few distinct sections: Private image-sharing and messaging, public image-sharing in its “Stories” section, and curated news and entertainment content in its “Discover” section. In a few months, Instagram has managed to replicate two-thirds of this experience, and it’s entirely possible that if Facebook wanted to, it could start working with brands and news outlets to bring original content to Instagram Stories, much like it did with live video on Facebook’s own site. Snapchat’s stickiness has lessened in recent months, according to SurveyMonkey, and it could continue to slide if Instagram adds more reasons to keep using the app.
Based on how much time users are spending on the app each day, Facebook’s influence on our lives, at least in the US, appears to have lessened slightly over the last few months, while Instagram’s has stayed firm. This may well be because Instagram was already an exceedingly popular social network for sharing heavily edited, aesthetically pleasing photos of the world and people’s lives. Its new Snapchat-like additions have given more users reason to hang around in the app.
But Snapchat has also been attempting to make its app easier to use, and to find new content: Its recent revamp included a new search bar that allows users to find new people to follow, and conversations they’ve already been having.
Snapchat, Instagram and Facebook haven’t really added to, or lost, many monthly US visitors to their respective apps over the last few months, but Snapchat’s third-place ranking may not inspire confidence in investors, given that many consumers tend to stick with products and brands through inertia. If people are already satisfied with Facebook or Instagram, and those services offer a new service they like, why would they bother switching to another app that may have invented that service?
Conversely, investors may like to know what Snapchat’s addressable market is. If Instagram, an image-sharing social network, can garner millions more users a month, why can’t Snapchat?
It’s not all bad news
Snapchat has another advantage over its competitors: Its users are younger. If investors are thinking about the long-term future of Snap, it may be heartening to know that the majority of the company’s audience is less likely to keel over and die than some of its competition. It also means they can grow as the app does, which was a major boon for Facebook in the last decade, where many of its original users graduated high school and college, got jobs, and started having disposable income to spend on things brands would want to advertise on Facebook. Snap’s users can mature as the app does.
That being said, if investors are looking for some sort of return in the near future, they may be more inclined to look at the prospects of Snap’s competitors, which have more of those users with disposable income—and fewer questions about their advertising models—right now.
Snapchat also has another advantage: People come back to the app a lot. Although they may spend more time on Facebook or Instagram, they reopen Snapchat more than Instagram. This could be a useful tool for advertisers, knowing that there are more individual instances in a day though which they can potentially interact with, and advertise to, a Snap user.