Lately, a lot of people have asked for my thoughts on the recent Snap Inc. I.P.O. If you’ve talked to me or seen some of my Facebook posts, you would know I’m not a fan at all. I’m putting this together to summarize my ideas and share my perspective on the situation.

Before we get to Snap, let’s take it back a few years.

Think back to 2012…

Facebook is a dominate player in the social media space, with their massive 2012 I.P.O valued at $104 Billion. Twitter helped change the world by instantly connecting everyone. Think about when they helped fuel Arab Spring.

Then social media became a thing. Instagram was the place to share photos with friends and family. Vine came out to compete with Instagram and was quickly acquired by Twitter. Snapchat was in its infancy, established that year.

Fast forward to 2013.

Twitter has an I.P.O of over $20 Billion and has yet to make their investors happy. Facebook and Twitter continue to compete for marketshare, while Snapchat grows quietly in the background. They reject Facebook’s offer for $3 Billion which shocked everyone—from Investors to people working withinsocial media such as myself. Who in their right mind would turn down a billion dollars, yet alone three!

As time passes, Twitter rapidly loses user growth and marketshare. Instagram beats out Vine and now its main competitor is Snapchat. Snapchat continues to grow, building out new features such as filters, and of course, their spectacles. Their main source of income was geo-filters bought by businesses, till this past year they began placing advertisements and sponsored content within tories. These advertisements/sponsored content could only be bought by brands or ad agencies with large budgets. This type of media buying severely limits the ad revenue growth potential. Just to give you some perspective, Facebook made $8.51 billion in revenue last quarter. And a lot of that had to do with the fact that anyone can go onto their ad platform and purchase advertising for $5. You can’t do that with Snapchat, and I don’t see it happening in the near future. This is strike one in my opinion on why Snapchat might be all hype.

Strike two: their user growth has slowed. This has been a huge problem in the last couple months, especially with Facebook attacking from all sides. First Instagram rolled out Instagram Stories, which fared better with older demographics who couldn’t quite grasp how to use Snapchat. Then Facebook rolled out a similar Stories feature in Messenger, which has 1 billion users. Facebook went as far as having a “Messenger Day” to promote their new features. Next, Facebook mimicked Snapchat in WhatsApp, which also has over a billion active users. Facebook is attacking Snapchat from all sides, quickly updating everything in their arsenal to emulate Snapchat as much as possible. Snapchat on the other hand, hasn’t had much of an evolution in their product, other than moving the branded content section. They’ve alsobeen struggling with low-end android phones, which are prevalent globally due to their low cost. Initially, Facebook faced a similar issue and rolled out Facebook lite, specifically to overcome the issue of low-end phones. I don’t see Snapchat releasing a Snapchat lite because pictures and video are essential to the platform.

The final strike comes from Snap’s identity crisis. Snap Inc. has positioned itself as a self-proclaimed “camera company”. This almost makes sense with the release of Spectacles, as well as Snapchat’s stance as an image first platform. Spectacles were rumored to have not generated as much revenue as the company would’ve liked. Unfortunately I can’t find the exact numbers, so take this with a grain of salt. If Snapchat is indeed banking on Spectacles to help generate an additional revenue stream, they will have to ensure that competitors can’t produce a product that’s not only the same, but better. . Imagine this scenario: ou have a choice between one pair of glasses that can upload video to Snapchat, Instagram, YouTube and other networks. Or Spectacles, which are limited to Snapchat. It’s only a matter of time before someone overseas makes the former—if they haven’t done it already—and that won’t be good for Snap.

Again looking at Snap’s identity crisis, NBC invested $500 million into Snap. This isn’t the first investment they’ve made. Other investments also include Buzzfeed and Vox. What this tells me is that NBC is looking at Snapchat as a content platform and another outlet where they can reach a younger demographic. Normally, this wouldn’t be a big deal, except for the fact that most of the users look at Snapchat as a messenger platform to quickly communicate with friends.

Let me break it down for you: Snap Inc. is a “camera company”, with an app that’s mostly used as a messenger platform with a focus on branded content. A little confusing right – AMIRITE?

TL:DR Here are my reasons why Snap is not a good investment:

  • Little innovation over the past year
  • Facebook is throwing everything it has at Snapchat
  • Revenue streams are disappointing at the moment
  • Slow user growth
  • The future of the company seems to be going in different directions

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