Only for Adrian Monroe

Muneerah AlQahtani & Alicenne Passavanti

SNAPCHAT

Introduction

Evan Spiegel is an American chief executive officer and founder of technology company Snapchat. When he was a student at Stanford University, Evan and his friends came up with the idea to develop an image messaging application. Comment by Michael Okrent: Where is the company based? Does it operate internationally? Comment by Alicenne: I think we should include something about his family background as well as the orginal purpse of the app – sexting

Snapchat is used for creating multimedia messages called snaps including photos and short videos. A user may capture an original image or use one already stored on the device he is using, he can add effects, texts, drawings and emoji before sending to friends and family or shared publicly (Hickman, 2014). With Snapchat you don’t have to manage yet another online persona. This is because the images are not stored on the device and can only be viewed for a specific period of time before it is inaccessible. Although for some time now one can take a screenshot and save it as an image before the image self-destructs or one could modify the app so that the images don’t destruct. However these tools are not available to the common user and requires a high level of knowhow around mobile applications. The application is intended for teenagers and young , though anyone with a smart phone can access and use the application. This is because mostly the people who share their moments through photos and short videos are teenagers and young adults (Poltash, 2012) Comment by Michael Okrent: Young, Is this an age demographic? Comment by Michael Okrent: Can it be used on an iPad or other tablet?

Snapchat is a visual web application and tool; relying on images primarily to pass along messages. Visual web companies that are in existence right now include, but are not limited to Snapchat, Instagram, Facebook and Twitter. All these companies share information through a myriad of methods including images, texts and videos; alternatively called multi media. Snapchat advanced the visual web application enterprise in three important ways: temporary messaging, advertisement appeal and cross-platform utility. Comment by Alicenne: Web or smart phone? Comment by Michael Okrent: and sound? Comment by Michael Okrent: concept or idea?

Findings

Spiegel has nine patents – all related to the development and improvement of Snapchat. (http://patents.justia.com/inventor/evan-spiegel) It is easy to note that the invention has improved over the recent few years. There have been additions and subtractions to the product that has ensured that the product serves its clients and that all their issues are addressed. The latest modifications as indicated by the official release include but are not limited to: swipe navigation, double tap to reply, sending of images to friends from your address book and new ways to add friends. Recent updates have also enhanced features including increased filters for images. This shows the adaptive nature of the product to the changing market environmentdemands. Comment by Michael Okrent: When did Snapchat hit the market? how long ago was that? Comment by Alicenne: Mention peekabo & why moving to a smart phone app at the same time as phoes with camera’s where gaining market share?

In 2013, Snapchat added a feature that expanded to include videos. This feature made it possible to send short videos as opposed to simple images. This was met with widespread positive feedback that encouraged the company to expand the video feature. Later Snapchat added a feature that allowed the images and videos to be stored and retrieved for for upwards of 24 hours.

Another notable improvement is its support for iPhone 6 and iPhone 6 plus. This makes the application operational across providers be it android or IOS, beating the competition like Imessage and Google hangouts where one can also send and receive pictures from friends.

In its latest announced innovation, Snapchat is now considering introducing a lens feature that will enable easier advertisements that are better placed so as to reach the targeted audience (Perez, 2014). Comment by Alicenne: Mention stories, channels & geofilters?

The invention benefitted the founder in three tangible ways: personal wealth, organizational culture and brand-respected entrepreneur. Snapchat was an invention that have ensured that Evan is now listed amongst some of the richest Americans. The visual web application and tool has an annual turnover of about 100 million dollars. This means that it is quite a profitable company and should the success continue, it will reach even greater heights making Evan more money. The valuation of the company at 16 billion dollars is also no easy task. This means that Snapchat plays an important role in the field of social media making Evan a force to be reckoned with. Comment by Michael Okrent: How is gross revenue connected to profit? There is no comment on expenses or how many employees the company has. Earlier patents were mentioned will they be discussed in another section? Comment by Michael Okrent: Is there a forecast available of the growth of the visual messaging market? Comment by Michael Okrent: What are the competitors value?

Evan is also credited with running an organization filled with young people and that encourages creativity. The laid back attitude of the company appeals to Millenials, and directs energy and attention to creative productivity. The organizational culture is likely to foster new innovation and developing parallel products and refining the already existing ones. Comment by Michael Okrent: Is there a reference for this?

Evan is now a respected entrepreneur within information technology. Government and private institutions seek his advice before making policy decisions that could affect millions of people and impact the economy in ways seen and unseen. This therefore makes Evan a powerful man whose opinion is sought and valued (Rusli & Macmillan, 2013).

The major basis for competition for Snapchat is the imaging service. The application is based purely on the ability to take photos and videos, edit them and share them with family and friends. Many other applications have the same functionality, which is the ability to capture images, edit and share them. This then posed a challenge to Snapchat to be more creative and find a niche that had not been explored - hence their introduction of the self-destruct feature. Comment by Michael Okrent: Is this the single feature that SnapChat has that differentiates it from the competition?

Add funding sources/process - AP

Snapchat faces competition from various other visual web applications including but not limited to Facebook, twitter, instagram and pintrest. These also provide a means of sharing the images but most of them are quite different from Snapchat as they all serve different needs in the market. Instagram is a platform for sharing of photos. The photos do not destruct and remain online for as long as the user chooses to keep them. Another major difference is that Instagram shares photos with a list of friends whereas on Snapchat one can have the image available publicly, albeit only for a period of time. The lifetime of the image coupled with reach make Snapchat and Instagram fundamentally different.

A second differentiator is placement of ads. Competing apps provide a space for advertisement, while Snapchat allows for in-image advertising. With Snapchat, the targeted audience does not have to scroll through other images and texts to find the advertisement since it will be right there in the image the user intended to view. Comment by Michael Okrent: How is this an advantage to the user? Most advertisements are not appropriate to the audience receiving them.

Competition has made Snapchat more valuable and thus attractive to the competition. At one point Facebook placed a competitive bid to purchase Snapchat, but was turned down, primarily because the company possessed more potential value than what was currently being offered by Facebook (Perez, 2014).

Snapchat sends images across the world wide webWorld Wide Web and ensures that the images destruct in a few seconds after the viewer has seen them making it ideal for people with privacy issues. Facebook was at some point the best application until they compromised on the privacy of the user’s information that people lost faith in the application and started looking elsewhere for applications that could provide privacy for the user’s information. The simple act of sharing a moment has become a valuable part of our lives today. We can now easily send an image of a place or experience to someone who for a reason or another could not make it to the said place or experience. It is an experience that people with no mobility or limited time can share in and feel part of by simply seeing the pictures as fast as a real time feed (Sawers, 2012).

Marketers and business executives have realized the power of Snapchat’s instantaneous and self-destructive image model. Several polls have concluded that people’s response is better when confronted with an image as opposed to conventional methods of advertising. Technology today has ensured that developers can place an advertisement inside an image, thereby improving the attention of the viewer. The image is the single most important feature of an advertisement, beyond slogan, content or duration. This therefore means that Snapchat has revolutionized the way we advertise. It has become a game changer in advertising, striking deals of up to ten million dollars with companies to ensure that they are visible to their consumers and remain relevant (Sawers, 2012).

Snapchat is also viewed as the next generation of messaging. This is because its method of communication is viewed as revolutionary. It reaches over 700 million people daily. Many of the other conventional messaging applications lock you in their world as much as possible. Whatsapp and Snapchat allow cross platform communication irrespective of your device or service provider, which is another added advantage of Snapchat.

Next, we move to looking back at critical errors that were made leading up to present day, followed by recommendations of strategic imperatives to consider moving forward. In hindsight, three critical errors were made by Evan Spiegel that fall broadly into ownership, interpersonal communication, and lack plan for monetizing the product. First, strategically, Evan Spiegel made a critical error with not defining ownership and role prior to the patent filing. Despite being the child of two successful lawyers, he started an app with three fraternity brothers (Reggie Brown, Evan Spiegel and Bobby Murphy) with no discussion of, or, written document that spoke to the ownership of the product. Unsurprisingly, he was sued by co-founder, Reggie Brown, who Spiegel squeezed out of the company after he was offended by Brown during a drunken phone conversation (, 201). Brown sued for 30% ownership and threatened to undermine the company itself. If Brown had successfully pushed his suit, in additional to bad press and discouraging additional investment, it could have undermined the investment agreements already in place since at that time Murphy and Speigel were estimated to only own 15% of Snapchat each at the time of settlement.

Brown filed the patent that Snapchat was built on. He placed his name first and Speigel’s last. The case was settled in the second half of 2014. The terms were not public, but the press release put out by the company acknowledged that the idea for Snapchat - an application that allowed the user to send photos that would disappear after viewing - originated with Brown, but did not describe him as a co – founder (Forbes, 2014). The relationship between the three friends went south around the same time that the application began to take off and Brown was filing the patent. Rather than having a drunken conversation, this was a time to have an adult conversation about ownership stake.

While he is not the first, and undoubtedly not the last to make translating a personal collaboration to a successful business venue extensively reported as one of the greatest innovation trapsSnapchat’s recruitment of top tier talent is only rivaled by the exit of that talent. In 2014 they lost their engineering VP. In 2015 they lost their COO, sales head, HR Chief, Chief talent officer, original content leader and VP of communications and policy (Fast Company, 2015). While the reasons for the exits are not explicit, the rapid turnover of executive staff imply management failure - the failure both to manage talent and communicate a consistent vision of the company.

In 2014 Spiegel has also had to apologize profusely for explicitly sexual, sexist and homophobic emails leaked from his fraternity days. While the statements were not particularly surprising from someone who created an app to allow for “safe” sexting, it put Siegel in the position of needing to convince users, funders and potential partners that in two years he had matured past the attitudes expressed in the emails and was now an mature, enlightened leader. (

Finally and most importantly, the inventor and his collaborators have yet to find a viable way to generate revenue in line with investor expectations. Snapchat did not expand but merely maintained its’ 16B valuation from 2015 to 2016 (). Many users see anonymity as the foundation of Snapchat. It is a innovative way to make video and image communication as ephemeral as a conversation. However this is the age of metrics and targeting advertising. Snapchat is faced with a major challenge: how to maintain user anonymity while providing data trails needed by advertisers. Despite the lack of data, advertisers have been willing to experiment on Snapchat in an attempt to reach millennials who are not consuming traditional media. Snapchat started asking advertisers for a minimum investment of $750,000 for a one-day advertisement. Most investors were hesitant at this price point, so Snapchat lowered their entry price points charging $250,000 for a live story ad and about $50,000 to take over an existing channel (, 2016). Snap Channel, Snapchat’s original content channel, was shut down within 10 months of its inception. It had been launched with much fanfare and expectation including the poaching of Marcus Wiley from Fox to be Head of Programming, Planning and Development (, 2015). In an attempt to pivot and re-position itself, earlier in 2016, Snapchat started selling custom geofilters which personal users and companies can use to promote events. (, 2016).

Most companies will face growing pains. Pivoting during these junctions is certainly reasonable. However, at a certain point too much pivoting begins to look more like wandering around aimlessly. To date, the investors and advertisers have been patient with Snapchat.

These three errors in combination reveal a web of ecological errors. The broader question then is, can Mr. Spiegel monetize this venue enough to satisfy his investors or will it be another start up with high hopes and deep pockets that fails to live up to its promise? Recommendations Next, we turn our attention to recommendations for Mr. Spiegel, moving forward with monetizing his current product, Snapchat. At the center of this issue is the intricate dependency of driving and informing advertisement and sales revenue, the primary revenue stream for online apps. Our recommendations aimed at increasing revenues are three-fold: 1. create complementary products that can generate revenue, 2. Facilitate and charge for the viral marketing process 3. Improve data metrics to justify advertisement investment. Our first recommendation is to create complementary products that can generate revenue. Currently Snapchat functions under the assumption that the user will not pay for neither the service nor for add-on products like filters. While users may not be willing to pay for all add-ons, it is reasonable that they would be willing to pay for some. As the demographic that grew up with Snapchat changes, the expectations are likely to change. The seventeen-year old that sent selfies in 2011 is now likely to be a working adult with a credit card and less free time to spend curating their Snapchat. There is real opportunity in tapping into brand loyalty and make users cross-over within Snapchat for uses other than mere entertainment. In app purchases could attract more ad revenue while also creating a smaller revenue stream through the use of snapcash.

At this point, Snapchat is an excellent forum for companies and salespeople to promote their product as well as their personal brand for free through individual user accounts. Snapchat does not yet profit from the exchange of tapping into super-users to disseminate companies and in individual promotion. Currently, companies and salespeople pay super users – individuals with big followings to either simply “shout out” (super users tell others to follow the company’s account) or for super users to post content that promotes the company’s brand. At this point, Snapchat does not profit from these exchanges. One example of how Snapchat could monetize these exchanges would be to create a platform where Snapchat acts as a software as a service. This would allow superusers to promote themselves as brand ambassadors, make it easier for companies to search through super users to find those that best align with their brand identity, suggest fees based on super user metrics, and provide template contracts. This would also serve to standardize the costs and user brand value. Formalizing the promotional relationship would encourage confidence in this evolving yet highly ambiguous promotional system. Snapchat has the opportunity to charge a transaction fee if a product is actually sold over the channel through the exchange of snap cash.

A third opportunity area is to improve data metrics to justify advertisement investment. Advertises have repeatedly complained that they cannot target ads, nor track viewer response to their ads. They basically have to take Snapchat’s word for it. Snapchat has finally begun to address those complaints. Towards the end of February, 2016, Snapchat announced collaboration with Nielsen Digital Ad Ratings to track ad views and demographic data similar to that available for traditional TV content. This is a crucial first step in getting advertisers the information they need to build trust in the channel, however it still does not give advertisers anything near the amount of viewer data available elsewhere on the internet. Lessons Learned

In the end, Spiegel has fundamentally changed how we consume media and mobile communication. He has created a product that allows users to communicate with images and video in the same way they communicate in verbal conversation; with the same ephemeral nature of a verbal conversation. The channel platform has the potential to change how we consume created content as well as interact with advertisements. Whether recent changes justify its valuation remains an unknown. Comment by Michael Okrent: What did you learn about his method of invention? his method of management? Is he a one hit wonder?

Reference

HYPERLINK "http://kinja.com/sambiddle" Biddle, Sam. (2014) HYPERLINK "http://valleywag.gawker.com/fuck-bitches-get-leid-the-sleazy-frat-emails-of-snap-1582604137" "Fuck Bitches Get Leid," the Sleazy Frat Emails of Snapchat's CEO

HYPERLINK "http://www.decipherforensics.com/snapchat"www.decipherforensics.com/Snapchat

HYPERLINK "http://www.laweekly.com/news/snapchat-went-from-frat-boy-dream-to-tech-world-darling-but-will-it-last-4136959"

Poltash N. A., (2012) Snapchat and Sexting: a snapshot of baring bare essentials. Rich JL & Tech., 19, 1

Perez, (2014) Snapchat is now the #3 social app among millennial. Tech crunch, August 2011

Rusli, E. M. & Macmillan D. (2013) Snapchat spurned $3B Acquisition offer from Facebook. The Wall Street Journal, 13

Sawers, P (2012) Snapchat for iOS Lets you send photos to friends and lets you set how long they are visible for May 7, 1-5

Reference

Hickman, R (2014). Snapchat unveolled: an examination of snapchat on android devices. Online, Decipher Forensics, www.decipherforensics.com/snapchat

Poltash N. A., (2012) Snapchat and Sexting: a snapshot of baring bare essentials. Rich JL & Tech., 19, 1

Perez, s, (2014) Snapchat is now the #3 social app among millennial. Tech crunch, August 2011

Rusli, E. M. & Macmillan D. (2013) Snapchat spurned $3B Acquisition offer from Facebook. The Wall Street Journal, 13

Sawers, P (2012) Snapchat for iOS Lets you send photos to friends and lets you set how long they are visible for May 7, 1-5

4