Snapchat Takes On Facebook

| About: Snapchat (CHAT)

Summary

Snapchat Memories re-defines Snapchat.

Snapchat is doing this to appeal more to the masses (older users).

Facebook will be directly impacted if this initiative is successful.

Snapchat (Private:CHAT) Memories is a massive update for Snapchat because it redefines what the app does, just like stories redefined it. If Snapchat is successful with its initiatives, one could make the argument that Snapchat is social media 2.0, with Facebook (NASDAQ:FB), Instagram and Twitter being social media 1.0. I'll go over the features in this article and what they mean to the social media landscape.

The new update can be looked at from two different perspectives: that of Snapchat and that of its competitors. From Snapchat's perspective, it is risky because changing its core premise can alienate its original users. From a competitor's perspective, this is bad news because Snapchat is already capturing user's time, so any new success can take more share from the other players. When Snapchat introduces a new feature, it is able to compete in a different way. The social app with the most to lose is Facebook since it is the biggest.

The memories update has a few features to it. It has the ability to save photos/videos in Snapchat in the section called "My Eyes Only." This category is similar to a cloud storage setup, making it a place where you can keep personal photos away from the eyes of others. This feature is in tune with Snapchat's original motto which was built off a sense of privacy as photos/videos automatically deleted after they were seen. Having this "My Eyes Only" adds to the time users will spend on Snapchat because those photos/videos will likely be the ones taken on the app originally, meaning this will be the only place a user can access them.

The most important new feature is the ability to upload a photo from your camera roll to your story. This makes it easier to share content on Snapchat. For example, before this update you had to film videos with your hand holding the screen. Now videos you took while setting the camera down can be added. If you're a musician, you can add content without having someone else hold the phone to record you. In a general sense you can now take videos you took on your phone that were meant for multiple social media platforms and share them on Snapchat. Thus it adds to the total content that can be shared on the app.

The negative to this new feature is it opens Snapchat up to having the same content users post on other social sites, making it become like everything else. The strategy Snapchat is banking on is in the beginning it wanted to force users to post from the app to gain notoriety. Now that Snapchat is a teen's favorite social app, it can open itself up to being more similar to other apps to grow itself. Snapchat had to start out as unique, to gain early adopters and is now becoming less unique to gain the masses. The original users may now leave, but Snapchat is banking on them staying as having more users gives early adopters a wider audience to share their content to.

Another feature is the ability to create your own customized story from within the app using snaps you've taken along with the photos and videos from your camera roll. Snapchat has been built off the premise of being an unfiltered look at your life. The ability to draw on pictures and add filters encouraged users to post content which was somewhat silly. Now that Snapchat gives users access to make their content better, it changes the dynamic of the app. It introduces the concept of perfecting what you post to the app. It's arguable that this was already in place as more users' friends began downloading the app and watching stories.

Obviously having better content on the app where stories are complete adds to the allure of staying on it. The risk of raising the bar to produce content is less content is posted. This is the problem Instagram and Facebook are facing. One could argue that an additional reason for their decline is the lack of excitement surrounding them as Snapchat has stolen the momentum.

The way Snapchat combats the increased difficulty in posting is by doing what I mentioned earlier which is to allow users to upload content from their camera roll to the app. By combining these two features, more content will be shared and it will be unique and compelling.

As I said, the app most affected by this change is Facebook as Snapchat is using these updates to appeal to older users which Facebook has a lock on. Snapchat has already been able to use 24 hour stories to focus on being live opposed to Facebook which has become stale. Snapchat is now trying to make stories the best place for someone to get to know you digitally. Any improvement to this feature is a shot across the bow at Facebook which is becoming like a resume where it lists information about you. It's arguable which process is better for getting to know someone, but it is not arguable which is more user friendly. What would you rather do? Look aimlessly at a list of when someone graduated and what their favorite movies are or view a video of their most recent day which paints a picture of who they are?

Snapchat is all about video and pictures which is what the millennial generation is about as well. While Facebook can integrate video capabilities, it can never say this type of content is weaved into the fabric of the network. With Snapchat's ability to re-imagine sharing personally created content, one can only imagine how they will innovate on sharing posts. As of now, articles, videos, pictures, etc., that you've found online cannot be shared with your followers. With Snapchat showing its goal of becoming more mainstream, this is the next logical step in this process.

Conclusion

I had previously posted negatively about Snapchat saying it was over-hyped. This stems from my skepticism surrounding the social media industry as a whole. The industry relies on ad spending and I think that spending cycle is headed lower. In the end, this is mainly a theoretical task since the stock doesn't trade publicly yet. I don't see a problem with looking at it in various perspectives as we try to figure out what Snapchat's future will look like.

What's not theoretical is Facebook stock. I remain bearish on the stock with the ad spending cycle in decline as it follows the economy lower. If Snapchat can take share from Facebook and Instagram, the stock becomes a sell based on macro and micro factors. Facebook is a story stock. If the narrative of Snapchat taking share gains hold, the stock can fall fast. This update by Snapchat goes a long way toward pushing Facebook in this direction.

Disclosure: I am/we are short FB.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.