Category Archives: Business

After Its Spectacular IPO, Snapchat Comes Under Scrutiny

The trendiest social network of the moment has a higher valuation than Delta Airlines but cannot be accessed by web browsers. Snapchat, a mobile app that has become the hottest social media outlet for the Millennial Generation, has achieved an incredible market capitalization of $31 billion.

 

Now that Snapchat’s parent company, which recently changed its name to Snap, is trading its shares on Wall Street, fascinating details are beginning to emerge. Online news publication Business Insider has been digging deep into Snapchat, and here are some of the most interesting details reported thus far:

 

Snapchat Was Always About Making Images Disappear

 

The main feature of Snapchat has always been its ethereal approach to social media updates. One the network’s founders thought about the concept of disappearing photos as he was sending selfies to a girl he was trying to impress. He thought about the potential of those images ending up published on the web for everyone to see, perhaps for many years. Reginald Brown talked about this issue with his Stanford University classmates, who shared his enthusiasm about making social media updates disappear.

 

Snapchat Started Off as Pictaboo

 

Naming schemes are extremely important for tech startups. The first name proposed for the mobile app was Pictaboo; it would later change to Snapchat but the cute ghost logo was there from the start.

 

Success Did Not Arrive Early

 

From 2011 to 2012, the founders of Snapchat were paying up to $5,000 a month for app hosting space even though their maximum user count was only 100. When a venture capital investor realized the potential of the network and cut a nice check, the network reached one million active users within nine months.

 

Even Facebook CEO felt the pinch when he saw Snapchat in action. He tried to counter with his own app, named Poke, which fizzled. The rest is history.

 

Social Media Failures

Social media IPOs raise investors’ interest. Facebook now is valued at humongous $400 billion. But not every new IPO in this area succeeds. Failure is typical when it comes to apps related to messaging, whether for text, pictures, or videos. As Techcrunch report shows, venture capital firms invested hundreds of millions in this type of companies, and most of these bets haven’t paid off. Those companies have either closed or haven’t succeeded in expanding their user base.

 

One example is Tango. This company develops apps for mobile messaging. So far, they have raised $360 million. But, the user growth has stopped. Tango used to be among the top 20 most downloaded apps in the United States, but now has fallen beyond top 150. Another promising app, YikYak, raised $62 billion. The company provides anonymous chat service for users locally. But, when usage decreased, the company had to fire 60 percent of its workers.

 

There seem to be quite many social media companies nowadays. Some will be bought out by others, a few will grow on their own, while majority will never fulfill their promises. Facebook is the giant when it comes to social media, and this company takes on its competitors successfully. Its Instagram service is going to be a tough competitor of Snapchat, a company which just went public and is presently worth tens of billions.

 

Even those companies which succeed in the marketplace may not bring rewards to investors. Twitter is down more than 40% off its highs. Microsoft, once a dominant company in the technology sector, hasn’t become a dominant player when it comes to social media. This business is tough, unpredictable, and its landscape changes so quickly that investors take high risks when betting on these companies.

 

Is Content Marketing Good for Your Business?

Content marketing is when businesses and other organizations create and share online materials such as articles, videos, and posts to attract customers and build brands. In an interesting article, Entrepreneur Magazine gives four reasons as to why it’s a good idea for businesses to invest in content marketing.

 

The first reason is that content marketing will help support an overall digital marketing strategy. Whether a business is running a pay-per-click (PPC) campaign, looking for search engine optimization (SEO), or growing social media presence, content marketing will fit right in.

 

For example, when seeking to attract customers, publishing blog articles answering questions common in the industry may actually help potential customers, and attract them to do business with the publisher.

 

Another reason why content marketing can be successful is that it attracts traffic to a website. And often it is a high-quality traffic.

 

A third reason to pursue content marketing is that there’s little risk involved. Lower risk comes when materials are published on marketers’s own sites, so there are no advertising costs, and associated risks, as with Facebook or Google ads. Content can also be posted on Facebook, Twitter, and other social media for free.

 

Finally, everyone else is doing it, claims the Entrepreneur article. At this point, it is estimated that 88 percent of business-to-business (B2B) organizations are doing it, and so are 76 percent of business-to-consumer (B2C) establishments. So, doing content marketing is a way not to be left in the dust.

 

For content marketing to succeed, it must be useful to target audiences, but it doesn’t have to be expensive. It also may not be so time-consuming, depending on what it is.

 

Overall, a business can prove its expertise with good materials, so good quality is a must is order to gain new customers.

 

Why Snapchat Looks Very Overpriced

Prior to Snapchat’s initial public offering (IPO), the shares of this popular social media company were priced at $17 each. This valued the company at $20 billion. In the first days of trading, the shares went up more than 20%, bringing the market capitalization to over $30 billion. According to a recent Forbes article, there are several reasons why it may not be a good buy.

 

First of all, growth is slowing. So Snapchat may not grow enough to justify its hefty market valuation. This company also doesn’t appeal to everyone. While millennials and kids love it, it is not so popular among older generations. Another reason is that this company is losing lots of money. Last year, it has lost over $500 million. And the present valuation is over 21 times Snapchat’s 2017 revenues.

 

Then, investors get no voting power. The founders control most of it. Yet another reason that should worry investors is that Snapchat’s ideas are copied by other social media giants. Facebook has introduced video-reel on its Instagram product. This is similar to Snap’s stories. Finally, initial investors are locked for six months from selling the shares, so once that period expires, they may rush to unload.

 

At this point, nothing is set in stone about how Snap’s shares will perform. Its market cap is less than 10% of Facebook’s, but is already more than that of Twitter. Analysts are worried that Snapchat’s stock price is more likely to follow Twitter’s and lose investors money rather than Facebook’s stock, which has been growing steadily. The conclusion is that buying Snapchat shares is very risky.

 

Are Political Posts Hurting Facebook?

Facebook is supposed to be a wonderful place where people can socialize. For untold scores of millions of people, it is. Others seem to be fighting more than socializing. Others prefer not to fight and just throw in the towel. Welcome to the world of political feuds on social media. There may be some humor to all this, but Facebook does need to worry about potential business losses. And those losses may pile up one day.

 

Facebook, the company, is not really doing anything wrong. The members of the social media site are simply sharing their opinions. Personal political opinions and the sharing of political news and commentary links does come with consequences. Satisfaction in Facebook is declining and people are not using the site as much. That is bad news for Facebook.

 

Now, Facebook is not on the verge of collapse. The company is still successful. People are just using the social media platform less because they are tired of being exposed to political sermons. Someone looking for fun and engagement probably doesn’t want to be exposed to heated conversations. So they use Facebook less.

 

The trouble for Facebook is the company is advertising supported. Fewer people using the platform put the engagement levels of advertising at risk. Advertisers who fail to see decent returns on their investment probably won’t pay for more ads. That is a formula for declining revenues.

 

Facebook might wish to consider a filtering option to keep politically-themed posts off of timelines. Someone who “opts out” of politics won’t have to look at displeasing threads. Hopefully, this would keep the person continually using the mostly fun Facebook platform.

 

 

 

Twitter Shares Fall Further

Twitter shares fell over 10% after the fourth quarter revenues have disappointed. Growth in sales has fallen for tenth quarter in a row to $717 million. The net loss was $167 million, which stands for 23 cents per share. Without certain expenses, Forbes reports, the company would have earned close to $120 million.

 

In comparison to Facebook, Twitter monetizes its users at 50 percent the rate. Meanwhile, monthly active user base has grown to 319 million, representing 4% increase. Last quarter, two million new users were added. Twitter also announced first quarter expectations. The earnings before taxes are expected to fall between $75 million and $95 million, which is far less than $190 million expected previously by the analysts covering the company.

 

According to Twitter’s Chief Operating Officer, Anthony Noto, growth in revenues will lag. One reason is increasing competition for advertising dollars, the other is related to de-emphasis of certain products.

 

“We’re focusing our investments on revenue products that strengthen our unique value proposition, especially in live and video,” claimed Noto. He added that positive feedback has been received from advertising partners.

 

In comparison to Facebook, Twitter is losing steam when it comes to attracting a larger user base. For instance, Facebook-owned Instagram has 600 million monthly users. And when users were asked which social media platform they’d choose if they had only one choice, two-thirds said they would choose Facebook, while only six percent would opt for Twitter.

 

Back in 2014, Twitter shares were trading close to $70, now the price has fallen under $16. After a new social media IPO came from Snapchat, analysts are already comparing the latter company to Twitter rather than Facebook. Presently, Snapchat’s market cap exceeds $30 billion, while Twitter’s is around 40 percent of it. On the other side, the market values Facebook is close to $400 billion.

 

Snap’s Core Mission Powers Its Rise

Social media connects consumers directly with a digital product and/or service. That kind of reach, coupled with instant gratification, has changed how businesses offer products and services and even how they establish business structures. Take Snapchat, or Snap Inc., as it is now called. The company is now a camera company, not a social media company. On March 2 it went public and earned $3.4 billion on the first day of trading.

 

What follows is a quick timeline explaining how a social media app transformed into a high-tech company. Here’s a hint: self-confidence and adherence to a core mission.

 

By now, most people know that the Snapchat app distinguished itself from other social media apps by making pictures and posts disappear. For teens, whose social media is prone to adult monitoring, this fulfilled an essential need. It took some time before the app caught on, but once it did the number of Snapchat users surpassed the number of Poke users, the Facebook competitor. When Facebook offered to buy Snapchat for $3 billion, Snapchat CEO Evan Spiegel turned it down. That’s the example of self-confidence.

 

An example of core mission adherence is seen throughout Snapchat’s evolution. When Snapchat offered new services to remain competitive, they stuck with their original mission. They stuck with photos and pictures. From geo-filters to funny filters and photo-based stories, Snapchat never offered extraneous options or branched out into non-photo-based services.

 

Before going public, Snap Labs was hard at work on smart glasses. These glasses are meant to take pictures. Simultaneously, Snapchat shifted its industry description. It is now a camera company. Social media companies and start-ups should pay attention. Snap’s social media has become a platform for its products. The platform is no longer the product. Photos, not social media, were always the core mission.

 

Snap Inc. is Introduced to the Stock Market

Snapchat took the world by storm in 2011 after it was developed by three friends from Stanford University. The unique feature behind this application is that the pictures and videos sent can only be seen for a short period of time before they are deleted. This feature brought a new system of communication to the social media platform. With popularity soaring and daily usage reaching in the millions, Snapchat founders changed their business name to Snap Inc.

After large success and receiving offers from major competitors like Facebook, Snap Inc. decided it was time to go public. They made their announcement about publicly selling shares of their business to the excitement of investors around the world. March 2, 2017 marked their first day of public trade. The hype surrounding this stock was massive. Unsurprisingly, Snap Inc. became the most active stock on the NYSE on its debut day. Snap Inc. grew an impressive 41.2 percent from its original pricing. This put the company at $24 a share from the beginning. These numbers put Snap Inc.’s market capitalization at $33 billion. In comparison to other social media giants, this is an impressive opening market cap. All signs point to steady growth as the first day of trading is closing out.

Supporters point to the potential success of Snap Inc. along with the visionary leadership of the company’s CEO Evan Spiegel. Critics on the other hand see the company’s reported $515 million loss last year as a sign of trouble for the future. Regardless, the excitement and hype surrounding the IPO of Snap Inc. has led many people to invest. While much of the predictions are simple speculation, time will tell whether or not the new social media company will be able to capitalize on these investments and continue to grow their brand.

Teen TV Star Launches Talent Agency with $1 Million

Many young people are chasing the dream of becoming social media only to find that the business side of social media has become very competitive. Worse still, these aspiring web personalities have trouble finding mentors. If only there were an experienced, young social media star to provide some guidance to these young people. As it turns out, there is.

According to TechCrunch, teen star Jake Paul (best known for the TV show “Bizaardvark”) plans to transform himself into a social media titan. His new company, TeamDom, has raised $1 million to fund its talent management business. Paul plans to leverage his millions of social network followers and his experience as an influencer to help minor social media stars become major social media stars. He has already had some success doing just that.

Paul, undeniably, knows what it takes to create a social media following, but does he have what it takes to run a successful business? That remains to be seen. Even very popular social media stars have found it difficult to monetize their success. It seems challenging, therefore, for a business to monetize the monetization of social media stars.

That does not mean that it cannot be done, though. A few years ago, it would have seemed inconceivable for a teenager to become a TV star based on his social media videos, but that is exactly what Paul has done. His originality could translate into success for TeamDom.

It is also a safe bet that small-time social media stars will flock to the new start-up. They will likely see in TeamDom a group of mentors who are peers and who understand the ins and outs of gathering a social media following. If the demand for TeamDom’s services are high enough, the company could be a success.

 

Fake News Stories Impact Brands in Social Media

The fake news phenomenon was first discussed during the surprising election of Donald Trump as President of the United States. Now that we are in the early days of the Trump administration, the issue of fake news is boiling over and starting to inflict collateral damage on businesses that engage in social media marketing.

 

According to a January survey conducted by Ipsos Public Affairs on behalf of BuzzFeed, the majority of Americans no longer trust the news stories they see in their social media news feeds. Facebook is the second most popular source of news stories for most Americans; only broadcast television is more popular by just one percentage point.

 

Credibility is an important aspect of a solid social media strategy; marketers are worried that the fake news scandal that rocked the 2016 presidential election could erode trust between established brands and the public. Brand managers should remember that the current political climate is too risky.

 

The digital marketing landscape has been tarnished by fake news stories. Even though American law enforcement officials are investigating these incidents, social media strategists believe that the damage will have lasting negative consequences. Brand managers should steer clear from discussing fake news stories with their social media followers for the time being. Unfortunately, this issue is very divisive from a political point of view; therefore, online brands should avoid any mention of this sociopolitical phenomenon over the next few months.