Over the last week, two new Snapchat photo filters, which let people appear as the opposite gender, ignited interest in the app. Doctored selfies appeared all over Twitter (TWTR), Facebook, Instagram, and even Tinder, where some users uploaded gender-swapped versions of themselves on the dating app to trick, or “catfish,” others. Superficial as the feature seems, analysts say it’s another stark reminder that Snapchat remains at the forefront of product innovation, despite missteps in more recent years, like a heavily criticized app redesign and the failure of its Spectacles eyewear.
"It’s been said that [Snap CEO] Evan Spiegel is the ‘Chief Product Officer of Facebook,’ and while that might be hyperbolic, Facebook has certainly borrowed a few of those innovations,” acknowledges Forrester forecast analyst Brandon Verblow. “But at the end of the day, how you execute an idea is just as important as the idea itself. Snapchat deserves credit for being very prescient and figuring out that this or that idea was something that was important, but Facebook has done a 50x better job at Snapchat at using those ideas.”
How rivals copy Snapchat
Early on, Snap caught the eye of social media rivals like Facebook, which copied Snapchat over the years with varying degrees of success. Just last week, Instagram announced it would shut down its standalone Snapchat competitor, Direct, and integrate some of those features back into the main Instagram app. Meanwhile, Facebook has rolled out its own versions of Snapchat Stories across Facebook, and its other properties, Messenger, Instagram, and WhatsApp, since 2016.
The adoption of Stories has proven so successful for Facebook that Facebook Stories and Instagram Stories now have over 500 million daily active users each. (Facebook CEO Mark Zuckerberg said during the company’s third-quarter 2018 earnings call last October users in the “not-too-distant future” will share more content to Stories than they will to either Facebook or Instagram’s feeds.) Messenger chief Stan Chudnovsky also told Yahoo Finance at Facebook’s annual F8 conference this May he wants to add Snapchat-like ephemerality to individual and group messages.
Michael Pachter, a managing director at Wedbush Securities, reiterated a harsh reality in the tech world: If a company develops a well-received product or feature, other companies follow suit and emulate that success, from Apple’s (AAPL) Amazon Echo-like Home Pod smart speaker to the slew of online streaming services following Netflix’s (NFLX) lead and funneling billions into developing original content. And for those old enough to remember, Facebook itself is hardly the first social network to come along — remember Friendster and MySpace? — but it’s certainly the most prosperous and long-lasting. In that regard, Pachter says Snap is where Facebook was from 2004 to 2008, when Mark Zuckerberg’s platform was more focused on product than monetization.
Snap vs. Facebook
“I think Snap management kind of shows up every day, and asks, ‘How do we make this [app] more fun, whereas as Facebook asks, ‘How do we make more money?’” contends Pachter.
Whether or not that’s actually true, Spiegel outlined a goal to “achieve full year profitability” in 2019 in a leaked memo published by Cheddar last October — a goal Snap won’t meet given the company’s first-quarter 2019 earnings included a net loss of $.10 cents per share. However, the company also reported better-than-expected revenues and daily active user growth for the period. Investors also seem unconcerned about Snap’s lack of profitability, at least for now. (Snap stock is up almost 97% year-to-date.) Pachter and Nomura Instinet analyst Mark Kelley now say Snap won’t become profitable until 2021 at the earliest, which is a year later than both analysts previously estimated.
The gender-swapping filter may be a pretty lightweight addition to Snapchat, but the feature certainly had the intended effect of driving user engagement and bringing mainstream attention back to the platform. According to two sources familiar with the matter, the gender-swapping filter had been in Snap’s product pipeline for over two years and internally, executives were fairly certain Snapchat users would find new filters entertaining.
The problem for Snapchat moving forward is staying ahead of the curve on products and features, contends eMarketer principal analyst Debra Aho Williamson.
“I think for users, you can quickly and easily veer from, ‘This is fun’ to ‘Oh, my God, that's so silly and so passé,” Williamson explains. ”There's a limited time window to coming up with some new creative thing that's going to drive people's engagement. You constantly have to be on the cutting edge of, ‘Okay, what's the next thing? What's the next thing? What's the next thing to keep people coming back?’”
Equally as important: Snap must eventually show investors it can monetize those newer features and turn a healthy profit.
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