On the face of it, a $3 billion IPO would suggest that this was going to be a good year for Snapchat and the bright young twenty-somethings who created the company. Unfortunately, a new report this week suggests that it might not be plain sailing from here on in.Data from Fluent draws attention to the fact that 69% of Snapchat users “always” or “often” skip sponsored advertising on the app. This figure is set to ring a few alarm bells with media buyers who, having learned valuable lessons from Twitter’s advertising platform, will scrutinise whether Snapchat is the right platform for their brands.
The report becomes even more of a concern for media buyers when you look at the same figure for the 18 – 24 year old demographic; a whopping 80% of them attest to skipping sponsored adverts “always” or “often”. This demographic is the lion’s share of the users for Snapchat so they will have to look carefully at how they market their ability to reach this audience and reassure brands and media buyers that they offer a genuine opportunity for a return on the marketing investment.
The last piece of less than positive data from the report shows that 61% of users don’t follow any news organisations using Snapchat’s Discover channels. While Fluent’s data was gleaned from thousands instead of millions of Snapchat’s users, it is enough to establish indicative trends that will certainly have grabbed the attention of potential investors.
One of the obvious forces at play here is the rather well-funded competition. Facebook, who had an offer to acquire Snapchat slapped away by the owners, have since ramped up the number of users on their almost identical platform (Instagram Stories) to close to 150 million users, leaving only a relatively short gap to equal Snapchat’s 161 million users (as of December 2016). Facebook’s not-so-subtle strategy of releasing very similar features on their own Instagram app looks like it could continue to stifle growth for Snapchat from here on in.
This goes some way to explaining a less than frantic take up for the recent IPO filing, as investors begin to question how much potential the company has to generate healthy revenues from their advertising platform in the near and long term future.