Snapchat’s Financial Trouble Due to It’s Inability to Infiltrate Established Networks
This article discusses some of the reasons for Snap Inc’s recent decline in the stock market, and apparent stagnation. Snap Inc, which owns the very popular social media application Snapchat, has had a hard time since its IPO as its service has failed the grow at the rate it was predicted to. Its service, originally a niche product is starting to bump into larger tech companies established markets and services, and it has had a tough time with this competition. Called the FANGs, the four tech giants Facebook, Amazon, Netflix, and Google in there own sectors dominate all services, and make it extremely hard for new start ups to enter into the space. They basically own their own networks, and grew due to network effects and because of that have a very loyal customer base. Like we discussed in class, a new product or service can stall very easily when it hits a network it cant infiltrate, and it seems like Snap Inc is failing because of this.
Snapchat has a strong base in North America and Europe, but outside of these two regions it has had a very hard time gaining a population base. This is further hurt because recently Facebook has adopted some of snapchats key features like stories, and put them into their application Instagram. Instagram already has a global following and the Instagram stories feature since the short time it has been around has gained more daily users than Snapchat.
Snapchat now being a major player in the tech sector has to start competing in some of their features with other tech giants, who spread heavily via network effects. Snapchat is struggling because it hasn’t been able to spread as aggressively as they have wanted to and are paying for it with lower stock prices since their IPO.