Snapchat (SNAP)'s IPO may seem like a success on its first day but I believe it's just typical stock market volatility. In long run I have not yet found the reason to invest into Snap yet. The reason is simple: Facebook with its three highly competitive armies Instagram, Facebook Messenger and WhatsApp each positioned squarely to stop Snapchat from growing.
Facebook Messenger Reporting to Battle Station TodayToday Facebook's announcement of bringing its Snapchat Stories-like feature "Messenger Day" to its Messenger app signify the more or less complete strategic move against Snapchat. The new feature is rolling out globally to Android/iOS users today allowing users to post photos and videos that disappear after 24 hours. Facebook had already launched the same feature Instagram Stores to Instagram and WhatsApp Status to WhatsApp.
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With a large user base, SNAP may be able to pull it off with revenue growth so the stock price may go up in the future. However, it does not mean that the future for Snapchat is rosy. As an stock trader, I certain have other many other choices to invest to. Right now, SNAP does not fit my requirement cause it does not have yet the market domination but Facebook does. Furthermore, SnapChat cannot bring values to advertiser like Facebook can as well.
In order to provide value to advertisers, company like Facebook or Snapchat must be able to distribute the right advertisement to the right user. It requires lots of profiling data of the users such as buying preferences or interests. Snapchat, with its' current model, can only see one narrow aspect of their users' live: the fun and entertaining side. I doubt Snap knows which user are interested in say buying car.
On the other hand, Facebook has almost 360 degree view on its users consuming all kinds of news and contents on Facebook's core platform. This data can be used to provide Messenger, WhatsApp and Instagram for ad placement.
Instagram as Direct Competitor to SnapchatInstagram, in recent years, has been growing more as an Online Shopping App in addition to a cool app sharing photos. Since Instagram users can also share their images and message to their Facebook account, Facebook would be able to link, at least some, Instagram users with Facebook users. So the Instagram and Facebook overlapped user base will provide even more consumer profile data for both platforms. Snapchat as a signal platform just for sharing fun loving pictures will never match that the depth and breath of the data Facebook alliance has.
Messengers and WhatsApp Positioned to Pull Snapchat's Legs
I don't see similar potential of Facebook Messenger and WhatsApp mainly because these two apps are born to position as simple direct one to one or group communication tool. They are NOT born as a content discovery channel like Instagram has grown to be. Snapchat seems to be like a direct communication tool as well (I am not experienced enough on Snapchat) despite that it has the privacy setting allowing user to let the public to see their post. So far my friends, tiny sample of Snapchat universe, are only using it as a friends only close communication platform. Anyway, Facebook Messenger and WhatsApp are not typically used as a way to publish their products or to discover others. That makes Facebook Messenger and WhatsApp more difficult to have Advertisement placement in between messages. I imagine that these Ads will be a major turn off to existing users (I know I will be). However, from the perspective of business competitive strategies against SNAP, Facebook Messenger and WhatsApp can be used to at least erase SnapChat's differentiation so to prevent user growth for SnapChat.
Snap Up SnapChat's User Base When The Price Is RightAt the end, as long as SnapChat's user base not growing quick enough and advertisers will not be sold to leave Facebook/Instagram as their preferred advertising platform, SnapChat's resources will dry up and unable to raise significant more money from the stock market. Who knows Facebook some day may SNAP UP Snapchat as its share value goes down to the right level, then it's good to snap up the Snapchat's user base too. If I were Snap, my exit plan would probably to sell the company too to either Facebook, Google, Microsoft or other big fish.
SNAP Is NOT For Me
I am not a real Snapchat user so I am not in a good position to evaluate Snapchat. And I am not saying that SnapChat is not a good app to use. At the end, it's fun to watch how the game and blog about it but I just don't think SNAP as a stock is not on my potential list for investment, not unless they have a new and totally compelling surprising story to tell!