From the Desk: Is Snapchat Becoming the New Facebook?

(Courtesy of Owen Corrigan / The Fordham Ram).

By Nick Wetzel

This past Thursday, Snap, Inc., the parent company of the popular social media app, Snapchat, had an initial public offering on the New York Stock Exchange. According to The Wall Street Journal, the company was valued at 25 billion, making it the largest U.S. initial public offering in over two years. In the wake of this eye-popping valuation and media hype, many are asking the question, “Will Snapchat become the next Facebook?”

The short answer is, no.

From a daily-active user perspective, Snapchat has a long way to go before it becomes a serious competitor with Facebook and its subsidiary, Instagram. As of 2016, Snapchat had 158 million daily active users, while Facebook has over 1.86 billion, according to TechCrunch. Although Snapchat’s user base is growing at a faster rate than Facebook, this growth is ultimately unsustainable given that Facebook is aggressively cloning Snapchat’s most popular features. One such feature called “Stories,” which are short user-generated video montages that disappear after 24 hours, already boasts 150 million users on Instagram, the same amount of users on Snapchat’s entire platform. Snapchat will not become the next big social media app if the main features that make it unique are easily replicated on existing platforms such as Instagram and Facebook.

In addition to fewer users, Snapchat also has far less revenue, and no definitive plans to monetize its platform efficiently. As of 2016, Snap, Inc. generated 400 million in revenue, and was not profitable, according the the firm’s I.P.O. filing. By comparison, Facebook, Inc. generated over $27 billion in revenue, and $10 billion in profit. Although Snapchat set a $1 billion revenue target for 2017, many analysts are skeptical that the company will be able to meet that. In a research note published the day of Snapchat’s IPO, equity research analyst James Cordwell stated that Snap’s revenue growth was “unsustainable given Snap’s unproven monetization potential, structurally lower profitability and likely challenges in materially reaccelerating user growth.” Unlike Snapchat’s rudimentary advertising platforms, Facebook has a state-of-the-art advertising platform coupled with billions of users, making it the clear choice for advertisers considering which platform to pour advertising dollars into.

One area in which Snapchat is excelling in is time-spent in app. According to App Annie metrics, Snapchat users spend 25 percent more time on the app than users on Facebook and Instagram. Part of that can be attributed to users sifting through geotags, but another part can be genuinely attributed to more engaged users. If Snapchat can develop a more advanced analytics platform and new ideas for monetization, the firm will be better positioned to compete for ad dollars with social media giant , Facebook.

There is certainly a space for Snapchat in the plethora of social media apps that dominate our smartphone screens. Snapchat allows us to connect with each other in more genuine and personal ways than other impersonal apps, like Instagram. However, given its small amount of daily active users, lack of monetization plans, and cutthroat competition in the social media space, Snapchat will not become the next Facebook.

Nick Wetzel, GSB ’19, is a finance major from Yardley, PA.


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