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Snapchat’s Upcoming IPO Poses Zero Threat To Facebook

Thursday, January 5, 2017 8:09
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From StockNews.com: As Snapchat parent Snap Inc. reportedly preps for an early 2017 IPO, the comparisons with social media king Facebook Inc (NASDAQ:FB) inevitably come streaming in.

But ultimately, Snapchat doesn’t have any chance whatsoever to catch Facebook. The reasons why are almost as varied as the billions of people that utilize Facebook’s platforms each and every day.

Facebook doesn’t just have an incredible amount of users. They also leverage their user base — and specifically the massive amount of data the users generate — to help make incremental improvements to their properties, which include Facebook itself, Instagram, and WhatsApp.

Snapchat may be innovative with their camera-based app, but they aren’t using any sort of advanced algorithm to push targeted content to users. In fact, they don’t personalize the experience of their users at all. In contrast, Facebook-owned Instagram recently changed its stream away from chronological to algorithm-based. This has resulted in a massive and instant advantage over Snapchat, with Instagram Stories launched by major brands in many cases outpacing their Snapchat counterparts by a ratio of ten to one — or more.

Facebook has also been “borrowing” (fine, stealing) most of Snapchat’s best features. CEO Mark Zuckerberg even said recently that “We believe a camera will be the main way that we share,” in a statement that almost mirrors Snapchat CSO’s Imran Kahn’s famous comment “Snapchat is a camera company. It’s not a social company. It’s a camera company.”

Facebook can simply sit back and wait for Snapchat to come up with new ideas, then copy them. It’s done exactly that, in fact, quite successfully over the past several years. Pokes, Slingshot, Bolt, One-hour messages, News feed-only, Quick updates, and the aforementioned Instagram stories are all pretty much direct clones of Snapchat features. Users love them, and as also mentioned earlier, Facebook uses its algorithmic muscle to push improvements to these features and improve the experience for users each and every day.

Finally, Facebook has mastered the incredibly difficult art of monetizing its user base. That’s something Snapchat has yet to do in a big way, as a leaked document last year revealed that Snapchat brought in a meager $58 million in revenue in 2015. That number is growing rapidly, with projections in the $500 million range for 2017, but even so, most believe the company is still years away from turning a profit.

Snapchat may see some success with its reported $25 billion IPO this year. It may even grow into a highly profitable company one day. But it will never catch — or even be a legitimate threat — to Facebook and its dominant hold over social media.

FB currently has an StockNews.com POWR Rating of C (Neutral), and is ranked #23 of 44 stocks in the Internet category.

This article is brought to you courtesy of StockNews.com.

You are viewing an abbreviated republication of ETF Daily News content. You can find full ETF Daily News articles on (www.etfdailynews.com)

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