7 Things Entrepreneurs Can Learn From the Fall of Snapchat

Snapchat’s initial success gave rise to excitement for many. Millions of users, hyper-growth, and close-to-unheard-of engagement levels. They raised huge amounts of money and became a household name pretty quickly. Yet, more and more people have begun to jump off of the Snapchat bandwagon, signaling the potential fall of Snapchat. This is less an attribution to them losing their success as it is to others (namely Instagram) taking it from them.

They decided to go public, hoping that it would help solve many of their issues. Those issues are still persisting, though, which is demonstrated, in part, by their current $ 15 stock price. That being said, there is significant time left in the company’s future. They will have opportunities to rebound and grow, but they are going to need to do so quickly.

There is also much that can be learned from Snapchat’s success and shortcomings. Here are seven things, specifically, that entrepreneurs can take away from their decline:

1. Never stop innovating.

One of the most difficult parts of running a company today is that you have to be future-oriented. Despite any current success that a company might be experiencing, it can change overnight. There is a reason that only 12 percent of companies on the Fortune 500 list in 1955 were still there in 2016. Maintaining a successful and large company over time takes significant and non stop innovation.

Despite how much there is to do each day, setting up for future success is critical.

Snapchat has seen this firsthand. With the emergence of new features on Instagram (see below), Snapchat is going to have to innovate to remain successful. They have tried a variety of different things, but many did not come until after Instagram launched stories.

If Snapchat had pushed their foot hard on the pedal, even when they were the clear leaders, they might have developed additional features and ideas that could have accelerated their growth.

2. Product replication is becoming more and more present.

Other companies can replicate most features and products outside of patents. Snapchat has been one of the biggest scapegoats of this. Despite the quality of many of their features, Instagram has suppressed this value by replicating them. Instagram has been especially effective since they have more users.

This demonstrates that as much as you might think a new product or feature is going to accelerate your company, there is a high chance that it can be replicated. It then places more value on establishing a community and a large number of users for your product. This way, even if someone were to replicate what you had, the power of your community would help you still win.

3. Be meticulous with the data.

Snapchat’s spectacles were one area of optimism within the company. One of the problems, though, was that they lost their novelty and most people would stop using them within a few weeks. Snapchat realized this, but if they had done more user testing or paid closer attention to the data, initially, they would not have made as much of an initial investment in spectacles.

Living in the data and understanding exactly what is happening behind your initiatives is the best way to find problems and trends early on.

4. Consider all audiences if you want to go global.

One of the large benefits of Snapchat is the young demographic that they have attracted. Instagram is similar, although both the younger and a little older demographic love it. In some ways, this benefited Snapchat briefly because of the targeted marketing they used at their captive audience. On the other side, though, it limited their reach.

For a company that wants everyone using their product, it means that all different types of people and audiences have to be able to get value from it. Ten years from now, if Snapchat is still around, the average age range might be older as current users continue to use it.

But a somewhat older demographic — even just five years, sees the value of non-disappearing photos. At this point in time, though, there is less interest in Snapchat. That is not always a bad thing, but when competing against Instagram and aiming for global reach, it can be detrimental.

Therefore, being thoughtful about longer-term goals and creating a product that can at least adapt towards those goals quickly is ever-more important.

5. There are serious costs to going public.

Going public gave Snapchat a huge influx of capital. That said, it also put them under much more scrutiny from the public eye. They now have to deal with the time needed for earnings reports, interviews, and managing press. It is too soon to tell whether their emergence as a public company came too soon, but the immediate impact has demonstrated that doing so will not fix all problems.

6. When there is competition, growth becomes even more important.

As alluded to above, Snapchat did not grow fast enough. If they had reached a critical mass of story users, then Instagram’s emergence might have been less of a threat. That said, focusing on growth too early can be detrimental. As a social app, though, especially with all of the other players in the space, their number of users is critical. Snapchat might not have put enough of an emphasis on growth in its early days.

7. Find ways to generate revenue early on.

Right now, revenue is one of the biggest struggles that Snapchat is facing. They are not doing poorly, by any means, but they are not able to generate as much revenue as Instagram.

One big reason for this is the lack of opportunity that exists in their ad platform. Advertising on Instagram makes more sense for most companies and brands. There is also much better analytics for ads built on Instagram than Snapchat.

Therefore, Snapchat is losing business because they did not think about the revenue piece sooner. With a more robust and effective advertising platform, they could be generating much more money.

At this point in time, it is even more difficult to make predictions because Snap would have to make a large product change to make ads more appealing. Product changes could be highly detrimental, though, leaving them in a difficult position.

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