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Snapchat’s entire business is hanging by a thread

Snapchat’s entire business is hanging by a thread

Snapchat is one of the fastest-growing social networks today. The photo and video messaging app is wildly popular amongst teens and millennials, who represent a massive chunk of Snapchat’s user base.

The company behind Snapchat, Snap Inc, recently went public with a $23.8 billion valuation in the largest IPO of the tech industry since Alibaba Group’s $25 billion IPO valuation in 2014.

That’s nice, but Snap has yet to turn a profit. In fact, in 2015 alone, Snap lost $372.9 million. A year later, the company posted an even bigger loss of over half a billion, putting it on an alarming downward cash trajectory. Snap is aware of this; on its IPO filing, Snap even admitted that it “may never achieve or maintain profitability.”

 

Snap even admitted that it “may never achieve or maintain profitability.”

million dollars lost in 2015

million dollars lost in 2016

2016 revenue (in millions)

But Snapchat’s problems may be much, much larger than just increasing year-over-year losses. Snap has very little proprietary technology baked into Snapchat. The Company’s service could be easily ripped off by social media industry heavyweights, such as Facebook, or by even bigger players, like Apple and Google.

Facebook has already copied Snapchat features, such as Stories, a feature that lets users post photos and videos to a shared roll of footage that expires automatically after 24 hours. Facebook has copied Snapchat so shamelessly that they even named their feature “Stories” as well.

Apple's Clips app is for editing video and isn't (yet?) a full social media platform.

And Apple may prove to be an even bigger threat to Snapchat than Facebook. Rumors circulating have claimed that Apple could be developing a Snapchat-esque social platform of its own, which, dangerously, could be baked right in to Apple’s popular iPhone. Likely to feature exclusive features, widespread availability, and total iPhone integration, an Apple-made Snapchat competitor could pull the rug right out from under Snap’s feet, leaving Snap in the same category as failed networks such as MySpace.

Only time will tell if Snapchat can pull out of its downward spiral and hold its own in the potential wave of tough new competition.

Apple Clips image credit: Apple. Article sources: Business Insider, Business Insider (Article 2), Statista

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