Snapchat’s parent company Snap yesterday broke the trend set by other tech companies over the past couple of weeks by posting underperforming quarterly results to investors. Netflix, Facebook, Amazon and Apple have all recently exceeded analyst forecasts with their results but Snap yesterday broke off from the pack to go in the opposite direction. The company’s share price nosedived in afterhours trading following an update that detailed expectations that growth is set to ‘decelerate substantially’ over the second quarter.
As well as concerns over user base growth, the company also intimated that it expected revenue growth to slow ‘substantially’ and operating expenses to increase over the coming months. Many social media analysts have expressed the opinion that there is a real danger the social media app’s February redesign, which has been slammed by users, could even end up killing the company. The dreaded comparison to MySpace has even been whispered.
With Snapchat one of the social media platforms most proactively embracing social commerce trends, marketers in the space may well wonder just how big a setback Snapchat’s travails may be for the growth of the sector. Part of the February redesign that appears to have gone so badly wrong included the new social commerce platform Snap Store. The company also recently added shoppable buttons into its popular augmented reality function that allows users to superimpose graphics onto their pictures. The company also bough shopping mobile app Spring in 2016, which catalogues a user’s favourite brands in one place and operates as a virtual shopping centre.
With social commerce features a significant part of Snap’s failing redesign, and the company struggling to drive revenue growth, the question clearly arises as to whether Snapchat has done social commerce wrong or if social commerce has been over-hyped. Snapchat isn’t the only social media platform or app to experience slower social commerce traction that was being predicted in the recent past. Perhaps users are not yet ready to buy inside their social media platforms to any significant extent or find social commerce functionalities detract from their wider social media experience.
Both concerns probably have some merit. User take up has been slow and social commerce functionalities and marketing to check-out journeys haven’t yet been nicely smoothed out. However, faith remains that social commerce trends will eventually reach tipping point and social media platforms iron out the customer journey. It shouldn’t be forgotten that Facebook also took some time before it learned how to effectively monetise advertising on the platform. They are quite good at it now.
While Snap’s troubles are certainly not a positive for social commerce, it is also unlikely they will prove to be more than a minor bump in the sector’s development. Whether Snapchat itself is able to turn things around is an entirely different story.
This article is for information purposes only.
Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.
There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.