Why I Hate Snapchat
I generally try not to hold strong opinions in finance because I’m very inexperienced and not very smart. However, a company I’ve very publicly held very strong opinions about for a while is Snapchat. This happens to be one of the few areas I may hold an edge over most market participants as I am a zoomer and have been an active user of snapchat since early high school. I’m probably one of few people who fall into both buckets of actual snapchat users and people who can actually read financial statements.
Snapchat’s core product is pretty amazing. It’s so simple, but somehow so much better than everyone else. They have by far the best picture messaging app in a way that’s difficult to quantify. The user experience is fantastic, and that’s reflected by their amazing user growth in spite of Instagram trying its best (and failing) to replace them. So why do I think so highly of the app, but so poorly of the company?
The key is in the actual monetisation. To illustrate what I mean I want to compare snapchat to instagram, facebook and pinterest. All three of them are social media sites with varying levels of similarity to Snapchat (instagram’s probably the closest) and are all run on ads. All 3 of them are able to gather information on you based on what you’re viewing and integrate ads for things you’d probably likely cleanly into the viewing experience. I legitimately love that FB and Insta have both identified me as a music head and now show me ads for new bands. This is effective monetisation. So how does this compare to Snapchat?
This is the snapchat discover page, a cesspool of weird, horny, crappy short form clickbait. The content on here is essentially the 2022 version of tabloid papers and is probably the worst, clunkiest version of short form content available right now (compared to Tik Tok, Insta and Youtube Shorts). There is always a ton of really weird content around female celebrities as well that I just object to on a moral basis and I know creeps a lot of people out. Not only this, but it is completely separate from the core picture messaging product. One could get full utilisation out of the Snapchat app while never even looking at the discover page. Most people I know only ever end up there by accident. Snapchat has a Whatsapp problem. It’s a fantastic core service without any real way to monetise. Unlike Whatsapp however, Snapchat doesn’t have Facebook to keep providing it with funds, they have to monetise somehow. When compared to every other social media site it’s clear to see the issue. They lack both the capacity to gather decent information on their users and the ability to serve them ads seamlessly into the core user experience. No company that’s being smart about their advertising spend is going to prioritise Snapchat ads over ads on platforms like Youtube, Google and Instagram. This is an issue I never see brought up in discussions of Snapchat stock and I find infuriating.
I don’t want to just be negative here, so I want to put out some suggestions as to ways Snapchat could improve. The first note is less of a monetisation thing and more of a cost control thing. Snapchat spend $2B a year on R&D on a service that at its core, hasn’t changed in like 5 years. I am almost certain Snapchat could be run significantly leaner without significant cost. Regarding monetisation, the integrated ads (such as filters promoting movies and other things) they’ve been doing more often are a big improvement and should certainly be more of a focus. These actually utilise their core product to give them a unique advertising proposition. If they are going to be flushing boatloads of money into R&D then cleaning up the discover page and investing in some decent content would be the first task, along with improving the user experience. Tik Tok and Reels make it easy to watch short form content, watching it on Snapchat is annoying and clunky, and ad placement is often very poor. Furthermore, Snapchat needs to get some actually decent content creators creating content for them, not just as an afterthought.
So that’s why I hate Snapchat. The monetisation is crap and the ad placement is objectively worse than pretty much every other social media platform. Would I be short it right now? I’m cautious, just cause I think the core service is solid, and if they figure out an effective way to monetise it effectively it’s probably good value here. Plus sentiment seems to have finally come down to my level based on price action. That being said I think it’s still very overvalued and hope it continues to crash and burn just so I never have to see Meghan Markle on the discover page again. Anyway I hope you enjoyed my rantings.