A series of studies published recently by RBC Capital Markets has categorized Snap Inc (NYSE:SNAP) subsidiary Snapchat below its competitors Instagram and Facebook Inc (NASDAQ:FB). The study, which surveyed 1,600 marketers, recorded a 65% preference to Instagram. Less than 40% said they were comfortable with Snapchat.
Apparently, Snapchat has close to 150 million users. However, even after its parent obtaining a $25 billion market cap in a recent IPO, it is still not able to attract advertisers. Many of them have remained reluctant to put their investment into it.
The reluctance may be as a result of lack of returns on investment
According to the RBC Capital Markets report, Snapchat scored 3.43 on a scale of one to eight points that ranked various digital outlets and services. Marketers and advertisers were expressing their contentment with the return on investment from the outlets. Snapchat’s position was below expectations and this may have contributed to the reluctance.
The company may also be suffering from the current wave of competition. Various outlets are keen on competitive features that will keep them in the market. For example; Instagram has a new feature; stories, which allows collections of photos and videos about an event.
But Snapchat has strategies that may help in undoing the competition
Clearly, Instagram’s competitive threat will have an impact in Snapchat’s initial public offering. However, the company is working on a strategy that is likely to help in fending off competition from Instagram. It has been recruiting various media companies, which will help in making shows that will span in a wide variety of genres.
Snapchat is also into the production of original TV-like content on its Discover platform. Many more advertisers have expressed their interest in underwriting episodic content for Snapchat. In the recent past, it has added Harper’s Bazaar and Vulture as content partners to Discover.
One of the content buyers said, “As they do more of this exclusive content, especially with legacy media brands, that’s going to bring more people in because those brands have clout and audience affinity with older demographics.”
Meanwhile, Snap’s stock was trading at $20.58 a fall of $0.46 or 2.19%