After a disappointing first year since its IPO, Snapchat owner Snap is putting its faith in social commerce trends driving the sustained revenue growth that will be needed to rebuild investor confidence. The social media’s new Shoppable AR feature, centred on e-commerce buttons within its popular Augmented Reality imagery that can be overlaid onto photos, has demonstrated positive signs of early take-up.
The new social commerce platform launched last week and early adopters have included Adidas, Clairol, Candy Crush-maker King and the advertising campaign for Amy Schumer’s new ‘I Feel Pretty’, movie. A share price boost has resulted, with Snap stock up almost 6.5% from early April. However, with the company’s share price still languishing over 55% below the level it started trading at following last year’s IPO, social commerce revenues will need to begin showing some real traction to get the company out of doghouse.
Social Media platforms going public through an IPO has led to mixed results. Facebook, despite this year’s troubles in the wake of the Cambridge Analytica personal data breach scandal, has, after a slow first year, been a roaring success. The social media kingpin has grown into one of the biggest companies in the world. Steadily growing advertising revenue and a successful acquisitions strategy that added messaging app WhatsApp and photo and video sharing social media Instagram has kept investors confident. Twitter’s trajectory was very different. Following the micro-blogging social media app’s IPO in late 2013 its share price soared, despite having been aggressively priced. However, subsequent struggles to grow advertising revenue streams and a 2015 cut to sales forecasts saw a slump. Twitter’s shares are currently trading around 26.5% down on their market debut.
Social commerce is still new and arguably to yet achieve the levels of user engagement that would mean it can be considered mainstream. However, social media apps and platforms are putting faith in its potential. Facebook and Instagram are also rolling out native features and platforms to enable the full e-commerce cycle to take place without users needing to leave their social media pages or apps. Snapchat finished 2017 strongly in terms of adding users. The last quarter saw the social media add 8.9 million daily active users, it’s strongest growth since going public. However, while a positive trend, user activity now has to be converted into strongly increasing revenue to appease investors.
Snap says that over half of the 13 to 34 year olds demographic in the USA use the AR Lenses feature the new Shoppable AR buttons feature in. If a reasonable percentage of that volume of users can be converted into native social commerce buyers, Snap might yet be able to mirror Facebook’s trajectory more than Twitter’s. The social commerce trend has to start delivering for its investors if the company wants to avoid the tag of being another social media IPO flop.