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4
May 2012, where only 2 million images were being sent per day
6
. This dramatic rise caused
issues as with an increased number of users Snapchat was facing difficulties with delivering
photos and videos in real time. Only one year later in November 2013 more than 400 million
snaps were sent daily continuing to increase as in June 2014 Snapchat claimed the number
of transmitted snaps to over one billion, while Snapchat Stories content was being viewed
500 million times per day
7
. The Pew Research Center in Washington found out that in
October 2013 already 12% of smartphone owners in the United States were using Snapchat
8
.
The main target group for the app are users between 13 and 23 years old. In April 2013 Evan
Spiegel stated that the majority of users, 80 percent, were from the United States
9.
This
figure changed lately as the international brand awareness increased, due to the growing
popularity among Millennials.
Figure 1: Snapchat App. Smartphone User Penetration by Age, Source: comScore Mobile Metrix, U.S., Apr 2013-Jun 2014
As can be seen in Figure 1, Snapchat is not only popular among the millennials, but it has
also experienced a growth within the 25-34 age group within the last year. Usage among the
non-millennials, age 35+, has not increased at the same rate, nevertheless doubled
compared to the previous year.
6
Gallagher, TechCrunch, 2012
7
Crook, TechCrunch, 2013
8
Pew Research Center, 2013
9
Dredge, S., The Guardian, 2013
5
Additionally to the regular app Snapchat introduced Snapkidz for users under 13 years in
June 2013. Compared to the original app users can only take snaps and edit drawings,
however this snaps cannot be sent to others
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. Nevertheless there is an issue with this
application since the correct determination of the age cannot be given. Although new user
have to enter the birth date with registration, the app cannot ensure whether the data is
correct or not. Moreover, in the same year, Snapchat team introduced Snapchat Stories.
Snaps threaded together to form a rolling flipbook of moments with each snap living 24
hours before it disappears. This feature helped to call other brands' attention to the
application. Today Snapchat contain many functions. Users can communicate one-to-one,
one-to-few or one-to-all using pictures, videos, captions, doodles or filters
11
.
2. Funding and Value
Snapchat has already raised more than $100 million of financing from investors including
Lightspeed Ventures, with $485,000
12
and Institutional Venture Partners, with $ 60 million
13
.
Other investors are Coatue Management, Difigat Sky Technology and General Catalyst
Partners and Benchmark Capital, who provided Snapchat eight million dollars in December
2012
14
.
In December 2013 Snapchat turned down a $3 billion acquisition bid from Facebook
followed by a $4 billion bid from Google
15
. First of all Evan Spiegel would like to increase the
number of user and snaps before selling the company, in order to advance the price
16
.
Facebook is losing young user who are more likely switching to Snapchat. In order to reach
this age range Facebook were willing to pay a high price and buy Snapchat
17
.
10
Magid, L., Forbes, 2013
11
Van Hoven, 2014
12
Gallagher, TechCrunch, 2012
13
Tsotsis, TechCrunch, 2012
14
CG Insight, 2014
15
Kleinman, TechnoBuffalo, 2013
16
Die Welt, 2013
17
Bercovici, Forbes, 2013
6
Figure 2: Valuation of companies, Sources: Bloomberg, WSJ, TechCrunch, Time, NYT, Companies, Dig-Capital
According to VB Insight, Snapchat grew shareholder value at almost $110,000 every single
day since the company exist as it is worth $ 10 billion now
18
.
3. Issues
Reggie Brown, a co-founder of Snapchat, claimed to came up with the idea of disappearing
photos and sharing this idea with Spiegel and Murphy. As he was pushed out without any
equity he commenced a lawsuit against Evan Spiegel and was seeking an extraordinary
amount in damage around $500 million. Spiegel stated that Brown may deserve `something'
for his help by starting the company but not the amount he is asking for
19
. This lawsuit is
contemporary and still in process.
Additionally to the lawsuit the company is facing various product-related issues. As the app
deletes the content after certain amount of time this fact has led to a widespread alternative
use for Snapchat: sexting. Sexting is defined as the practice of sending or posting sexual
18
Koetsier, VB Insight, 2014
19
Shontell, Business Insider, 2014
7
suggestive text messages and images, including nude or semi-nude photographs
20
. During
the viewing period, the recipient must maintain contact with the device's touchscreen,
thereby hindering the user's ability to take a
screenshot
, which is allowed. The sender will
get a notification if the recipient takes a screenshot. However there are other possibilities to
save the snaps, for example, using another device like a camera or another smartphone.
Furthermore the videos are saved at the local memory of users phones and can be recalled
by installing a file browser.
According to a research in the UK in 2013 half of all 18 to 30-year-old respondents received
nude pictures through Snapchat. An even higher number of the interviewees, 67%, had
received images of inappropriate poses or gestures
21
.
On the other hand in 2014 University
of Washington and Seattle Pacific University were conducted to examine why and how
people use Snapchat. Unlike than initially presumed the app was used for a variety of
creative purposes and not primary for sexting. Only 1.6% of respondents quoted to use
Snapchat for sexting mostly where 14.2% already sent any kind of sexual content via
Snapchat. 59.8% of respondents reported to use the app for funny content like sending
hilarious and weird faces to their friends and family
22
. After the sexting hype in 2013 users
initiated to use Snapchat for creative activities rather than for inappropriate purposes.
The study also researched as to why people use the app. The results were surprisingly as
most respondents stated to use the application because of the fun the app provides and not
because of the security properties. Almost 80% of respondents are aware of the fact that it is
possible for the receiver to save the snap. However it would not affect their behavior to
continue using the app. The timeframe the sender sets always depends on the relation to
the receiver or the snap content
23
.
Additionally the app is used for many improper purposes
such as underage drinking, cheating on tests or crude drawings.
Snapchat provides a feature to its users to find their friends on the service while entering
user's mobile phone number. The company assures that the phone number is the only
information that is being collected. However, in fact Snapchat not only collected the phone
20
University of Utah, 2012
21
Kemp, Brand Republic, 2013
22
Roesner, Financial Crypto, 2014
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Roesner, Financial Crypto, 2014
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number but also the names and phone numbers of all the contacts in the user's address
book, without giving any information to the user
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.
Furthermore, as it is often a case for online companies, Snapchat was hacked in December
2013. 4.6 million users were affected by this action. However, this hack was only a warning
to show the company how easy it is to gain access to usernames and phone numbers. The
hacked stated, "
our motivation behind the release was to raise the public awareness around the
issue and also put public pressure on Snapchat to get this exploit fixed"
25
.
4. Competition
The application's success led other companies to copy the concept
26
. The network giant
Facebook developed Poke, a self-destructing app for photos, videos and Facebook messages.
Other than Snapchat, however, Facebook keeps data for a certain amount of time at its
servers. As Poke has been highly unsuccessful it pushed Snapchat even more to the top
27
.
After Facebook failed to buy Snapchat for $3 billion in December 2013, Mark Zuckerberg
warned Evan Spiegel that he plans to launch a rival if Spiegel did not accept the offer.
Consequently, Zuckerberg started to develop its own Snapchat-style app, Slingshot. Using
this app users have to send back an image before they can open the one they received
before
28
. Facebook released a statement when launching the app: "With Slingshot, we
wanted to build something where everybody is a creator and nobody is just a spectator.
When everyone participates, there's less pressure, more creativity and even the little things
in life can turn into awesome shared experiences. This is what Slingshot is all about"
29
.
Today Slingshot is
the biggest competitor for Snapchat. After Poke, previous app from
Facebook, now Slingshot attacks Snapchat. As Facebook already bought and developed
Poke, WhatsApp and Instagram it has an advantage in developing their own app now
30
.
24
Federal Trade Commission, 2014
25
Johnson, Mercury News, 2014
26
University of Utah, 2012
27
Kelly, Venture Beat, 2012
28
Bercovici, Forbes, 2014
29
Bedigian, Benzinga, 2014
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Dressler, Tech, 2014
9
Instagram, which is owned by Facebook, launched Bolt, an app that allow users to send
photos and videos to their contacts at the single touch. As soon as the message has been
read it disappears, like a snap. The big difference is the speed users can take pictures and
send them. Once users signed up with their phone number, the app downloads all contact
on users' phone and let them appear as people's faces at the bottom of the screen. When
users take a picture they can simply tap one face and send the picture to the specific friend
without any additional procedures. Bolt saves the content on Instagram servers for 30 days.
However this app is available in selected countries only, Singapore, South Africa and New
Zealand. According to TechCrunch, the company is testing Bolt in this three English-speaking
countries first, before launching the app in the United States
31
. This three countries were
picked because of high Instagram usage, high penetration of Android and because they all
use the same language, English. Instagram wants to solve all issues with its app before
entering the US market.
Furthermore the giant Microsoft has developed a Snapchat clone, WindUp. This app has the
same characteristics as Snapchat and it is available on Windows Phone's app store since
August 2014
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.
After the launch, Microsoft has published a blog saying that WindUp is a
research project. With this project Microsoft want to learn how people create, share and
converse about content online and it is not meant to compete with other apps or for
commercial purposes
33
.
Figure 3: Leading Social Media Apps Among 18-34 Year Olds by Smartphone Penetration,Source: com, Score: Mobile Metrix,
U.S., June 2014
31
Constine, TechCrunch, 2014
32
Olson, Forbes, 2014
33
Harper, Microsoft Research, 2014
10
The comScore research shows that Snapchat is more popular amongst Millennials than
Twitter in the US in June 2014. The popularity has more than doubled from 12% in
November 2013 to 32.9% in June 2014
34
. Even though Facebook is still the number one,
more pictures were shared via Snapchat than through Facebook or Instagram as people
rather use private, self-destructing app then an application where their pictures and videos
are saved and difficult to delete from servers
35
.
5. Business
Snapchat's marketing potential was published in September 2013 by the Vocus company,
with Taco Bell, Karmaloop and 16 Hadles. This companies were identified as the early
adopters of the application. Vocus stated, "Brands can set up profiles on the network and
add users as friends who opt into the brand's messages by accepting"
36
. Companies, for
example McDonald's, provided their Snapchat fans `behind the scene' exclusive photos from
a TV launch of its new sandwich. This way McDonald's engage their fans to follow and
become brand loyal
37
.
Apps like Snapchat are quickly evolving from rapid messages between close friends to
content-rich platforms that are open for brands to explore. In order to understand how to
use Snapchat for marketing companies first need to understand their audience they are
approaching. As a marketer Ryan Bonnici said, the app is interactive, therefore companies
can create back-and-forth dialogue with followers in a way no other social media platform
can.
The feature `stories', which was introduced in 2013, was the main reason why companies are
using Snapchat for marketing nowadays. As we live in a time where the attention is minimal
the unique selling point of Snapchat is that the receiver pays attention while pressing and
holding the screen as he or she knows that the snap will eventually disappear after the time
run out. Snapchat stories is an extended feature as users are allowed to send a series of
photos that last 24 hours.
34
Wollaston, Daily Mail, 2014
35
Crook, TechCrunch, 2013
36
Wong, Outmarket, 2013
37
Reader, The Guardian, 2014
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