Are you on Snapchat? I am, although I don’t pretend to understand it as well as some of my younger friends. What I do understand about it, however, is that they are facing the sort of dilemma that torments a lot of businesses. I don’t have any real answers today but maybe you do. Let’s see.
Snapchat began as a way for users to send disappearing content – photos, videos – to other users. Of course, as with everything on the internet, the content never really disappears (screengrabs, anyone?), but let’s put that aside. The app became very successful and now has over 100 million daily active users. That’s the sort of scale that becomes incredibly appealing to marketers, and it also makes other revenue options such as commerce and data mining more viable.
Now the dilemma. Snapchat’s business has been built to a great extent on the premise of privacy. If you’ve ever tried to locate someone on the platform, good luck. If you don’t have the email address they’re using or their exact Snapchat name, it’s very hard. That may be great if you’re a user trying to avoid stalkers, but if you’re a brand trying to get users it means you need to do a lot of external marketing of your Snapchat presence. This quote from a recent Digiday piece says it nicely:
One of Snapchat’s main selling points with users entails its combination of anonymous users and disappearing messages. The company has been strident about not building profiles on users to creepily advertise to them. As the reality sinks in about the need for a viable business, more targeting and data capabilities follow. Technology partners are able to bring their own data to an API — email lists and other customer information — to serve ads against.
Therein lies the dilemma. Until now, Snapchat has tried to make money by selling “lenses”, overlays that will let you alter your snaps so that, say, you can be vomiting rainbows (and who doesn’t want to do that!). While $300,000 a month in lens sales is nothing to sneeze at, it’s not nearly the kind of monetization that a platform with this kind of user base can command. They also tried to sell ads embedded in some of the “stories” that are a part of the service (they’re a series of snaps linked together around a theme). Apparently they don’t have enough user data or metrics about engagement to satisfy big spending. So what do they do? What is the business?
The balance between staying true to the reasons customers engaged with you in the first place and making money is tricky. Better metrics and targeting might mean less privacy. More ads in content mean less user enjoyment (no one likes being interrupted). Less enjoyment and decreased privacy might mean a decline in the user base. But it is a business, and investors want to see a return.
So what’s the answer?