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Facebook’s competitors are not Twitter and Snapchat

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Written by Kamil Arli

Forbes is reporting that Snapchat’s upcoming IPO is mostly a massive pump and dump.

With Snapchat’s long-awaited IPO finally over, it’s time to take a look at how the big social media companies stack up and what their prospects are going forward. While there will always be startups with big dreams and innovative ideas, the rate at which the marketplace has matured over the last few years makes it hard to envision any of them being anything other than transitory niche players in this space. For now, there’s still one undisputed king, and few others with varying levels of potential but also a host of red flags.

Facebook. On an entirely different level than any other social media company on the planet, Facebook’s competitors are not Twitter and Snapchat. They are Google and Apple. Ad revenue last quarter was up 53% over the same period the previous year, and at more than 1.2 billion daily users, roughly 16% of the world’s population logs on to the site at some point every day – astonishing given that China’s censors it.

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THE KEY FOR FACEBOOK / INSTAGRAM IS ITS VERSATILITY

The key for Facebook/Instagram is its versatility. It combines the traditional elements of a social media platform that generate high levels of interactivity with other emerging technologies that users increasingly crave, such as user-generated live video. We expect the company to continue along this path and ultimately produce content or get into distribution, especially in light of YouTube’s recent announcement that it will offer a TV service aimed at cord-cutters.

Every time Facebook unveils a new feature, whether it be news feeds, chat or games, the aim is to dissuade users from ever leaving the site. Boosting its video and entertainment capabilities will be the next evolution of that effort. Meanwhile, Instagram has become what Facebook was five years ago – a rapidly growing and continuously evolving destination that attracts the young, highly engaged audiences that are coveted by advertisers. Facebook is a behemoth with few, if any, weaknesses.

AS A PHOTO AND VIDEO SHARING SERVICE

Snapchat. As a photo and video sharing service, Snapchat has been an industry trailblazer, having popularized ephemeral image technology and augmented reality filters. That said, it’s never turned a profit, and given the limitations of its ad platform and the way in which it burns through capital, there’s no reason to believe it ever will become a consistent money maker. What’s more, Facebook and others have already replicated (some would say stolen) their most compelling features, including its photo and video streams. In fact, Facebook didn’t even bother to come up with an original name: Snapchat calls it Stories and so does Instagram.

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For these reasons, Snapchat’s upcoming IPO is mostly a massive pump and dump. A few venture capital firms have spent millions propping up what is, in essence, a fun but not profitable platform, and now they want their money back. The company has some value, due to its popularity with teens and 20-somethings, but it’s not worth $20 billion. Not close. At $17 per share or above, this is a bad deal for the investing public.

Twitter. In the wake of the election, it’d be easy to make the argument that Twitter is the most influential communications tool in the world. Donald Trump’s feed doesn’t have the most followers, but it’s certainly the most talked about, and that translated into a mountain of free publicity over the last year and, without question, help to trigger strong user growth in the fourth quarter. Still, that momentum did nothing to propel revenues, which eked out just 1% gain and have declined for ten consecutive quarters.

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The problem is simple: CEO Jack Dorsey. He has one eye on Twitter and another on Square, the payments firm he founded and runs simultaneously – which, incidentally, is also struggling. Meantime, Twitter has failed to modernize its ad platform to include more video or make even simple updates, like slight tweaks that would allow users to edit tweets without deleting them. It has also been slow to rein in abuse, allowing fringe groups to fester, which has unnerved advertisers and other would-be users. Bottom line: Twitter has tons of potential, but until it gets more focused, strategic leadership, it will remain a disappointment.

source: forbes

About the author

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Kamil Arli

Editor of DigitalReview.co. Digital Media Consultant

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