Snapchat Final Team 6

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Duke University *

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Management

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Feb 20, 2024

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Team 6 – Shri Desai, Akash Kathavate, Subha Mohan Raj, Manish Mahesh Saunshi, Nivedita Narayanan Snapchat Report Executive Summary This Report is for the Board of Directors of the GCI team, to state the business analysis situation at Snap, the consulting team’s strategic recommendations, and whether to invest in Snap or not. Snap is now facing a difficult situation where they are unable to differentiate itself in the social media market and face significant losses in ad revenue. Competitors like Tiktok and Meta are threatening to bring Snapchat to the ground with their feet firmly placed in the market with their loyal and highly engaged audience. Snap must do something quickly before they die in the market Conduct Strategic Research on Societal, Technological, Economic, Environmental, and Political (STEEP) shifts in the firm’s Strategic Landscape. The landscape was thoroughly analyzed to identify the Competitive/Complementary moves resulting from the disruptions in the current market. The Consulting Team believes that Snap is now in the classical range and must move into the visionary range in order to build a sustainable model in the social media market. They must reposition themselves as a company that promotes ‘Closeness and Privacy’, where users are able to be their true honest selves and share precious memories with their close friends- knowing that their memories are private. The consulting team believes that Snap should make the following changes to survive in the current landscape,  White labeling snap camera technology, inviting third-party vendors into the ecosystem  Introduce more VR games for friends who are in different locations to engage with one another- reducing the limitations of distance. Games that include the use of a camera like scavenger hunts etc.  Collab with other companies to allow users to carry their moments with them, in the form of goods such as pictobooks/albums, keychains with their bitmojis etc. Investing Recommendation: GCI should invest in Snap.

Team 6 – Shri Desai, Akash Kathavate, Subha Mohan Raj, Manish Mahesh Saunshi, Nivedita Narayanan 1. Introduction: Snapchat is an American multimedia instant messaging app and service developed by Snap Inc. originally Snapchat Inc. Principal feature of Snapchat is that pictures and messages are usually available for a short time before they become inaccessible to recipients. This app has evolved from focusing on person-to- person sharing of photos to presently featuring users’ Stories of 24 hours of content. This allows users to keep photos in the "my eyes only" which lets them keep their photos in a password-protected space. This has also reportedly incorporated limited use of end-to-end encryption, with plans to broaden its use in the future. Recently, Snap has decided to restructure and refocus the business, and consequently, 20% of its workforce will be let go and its popular app Zenly will be shut down. The company’s shares, which ended down 2.4% on July 2022, have lost nearly 79% of their value this year. The company posted a quarterly net loss of $422 million, compared to a $152 million loss in the same quarter last year. As recession concerns grow, Snap is finding it hard to convince digital advertisers to come on board. Unfortunately, given its current lower rate of revenue growth, it has become clear that it will reduce its cost structure to avoid incurring significant ongoing losses. Snap’s loss in ad revenue had multiple causes, primary among them was the emergence of a new competitor with a bold vision to “To inspire creativity and bring joy.” Another reason for Snaps’ reduced revenues has little to do with competition but everything to do with values. When Russia declared war against Ukraine on March 1, 2022, Snap announced it was halting all advertising on its platform in Russia, Belarus, and Ukraine as part of an attempt to curb media disinformation amid Russia's recent invasion of Ukraine. The company said that it was also ceasing its advertising sales to all Russian and Belarusian entities as well as complying with all sanctions imposed on Russian businesses and individuals. This was another blow to Snap’s ad revenue. Like other tech companies, including Google and Apple, Snap plans to reduce its rate of hiring as it looks for different ways to cut costs, though it also announced to buy back $500 million in stock. 1.1 Challenges facing the firm: 1. The clones of Snapchat like Instagram are doing much better than Snapchat which is very challenging to overcome. 2. New competitors like TikTok and BeReal entered the market which attracted more customers compared to Snapchat which led to a reduction in the number of users for Snapchat. 3. Russia’s war against Ukraine made Snapchat halt all advertising on its platform in Russia, Ukraine, and Belarus which affected its revenue. 4. The lowered rate of revenue growth has made Snapchat reduce its cost structure to avoid incurring significant ongoing loss. 2.Competitive Advantages: 2.1 SWOT Analysis:

Team 6 – Shri Desai, Akash Kathavate, Subha Mohan Raj, Manish Mahesh Saunshi, Nivedita Narayanan Table 1.1: SWOT Analysis Strengths  Unique Innovation Hub: Snapchat is leading innovation with its continuous effort in growing its features like the camera, AR, snap maps, minis, snap games, spotlight, and stories parallelly with its daily active users. The company also announced this month that it’s introducing Snapchat for the web to let users send snaps and chat with friends via video calls, all from their desktops.  Huge Consumer/User base: Snapchat has over 166 million users, with a 36% annual growth rate, and this figure is anticipated to increase every year  More User Privacy : Snapchat provides more privacy to its users with the self-destruct function, which is a big benefit for its target group, which is millennials. The short life of messages has ensured greater privacy and has reduced the risk of later being misused  Strong Brand Image: Snapchat has already become a well-known name in the world of technological sectors. Its name has become a brand on its own as one of the most popular social media sites, propelling growth. Weaknesses  No diversification of Features: Snapchat attempted to diversify itself in numerous sectors, but was eventually unsuccessful, causing the firm to lose a lot of money. Snapchat Spectacles, one of its features, proved to be a colossal flop.  Revenue Growth decline: Revenue growth has been on a decline as snap makes most of the money (98%) from Ads and not through any other major pipeline.  Not good Reputation in terms of the content shared across: Snapchat does not have control over the type of content shared on the platform. There must be something that could filter out/not all the harsh content that people can share across. Opportunities  Higher Customer Engagement: The more users get involved, the faster the firm will develop - and this might be one of Snapchat's largest prospects. How Snap will try to keep the engagement and make the users hooked will play a significant role in snaps long-term growth now

Team 6 – Shri Desai, Akash Kathavate, Subha Mohan Raj, Manish Mahesh Saunshi, Nivedita Narayanan  New Features (Ad management, VR, AR, etc.): Snapchat has evolved several features that have made it appealing to users over time. As a result, new features might be a game changer for the organization. o AR/Spectacles : Snapchat should shape a new ecosystem by leveraging AR/Spectacles. Instead of releasing these glasses publicly, it’s treating these Spectacles like a private beta. It should release these AR spectacles to the public before any other competitor does it in the market . o One-on-One engagement : While one-on-one engagement might sound like a challenge at first, it is an opportunity for the brand to build better, more trusting relationships. Trust is a huge contributor to converting their audience into paying customers. o Snapchat now includes Discoverability : This feature allows users to explore premium content from publishing partners. Sharing content on Snapchat Discover can increase brand awareness and reach but becoming a Snapchat publishing partner is not a very easy and straightforward process. This involves an official agreement with Snapchat to post content on Discover that will engage audiences. Previously, many brands had to share their Snap codes on other platforms to help anyone (who also was on Snapchat) find them.  Technological advances: The creation of Snapchat is due to its advanced technological developments. There are various and limitless options in this area. Technology has increased the efficacy and efficiency of brands in the market, providing them with a competitive advantage. Snap should make technological advances. Threats  Stiff Competition: SnapChat, among other things, provides instant chat, photo and video sharing, and other multimedia services. Unfortunately, in this digital age, many other firms are offering comparable goods, with some offering far more than SnapChat. With globalization, any customer can readily evaluate the best platform for meeting their demands. SnapChat must improve its technological and innovative capabilities to separate itself from the competition and provide greater services to its clients.  Legal restrictions: Different countries are developing legislation to manage the social media arena. There are even governments that have blocked access to SnapChat. Laws that restrict SnapChat usage are a danger that might force the brand out of the market.  Financial Planning: Snapchat has had limited success in developing solid financial plans. They rely heavily on advertising for revenue, which accounted for 96% of their entire revenue in 2020. Furthermore, when it came to expanding the firm, its economic strategy was not particularly promising. Interpretation: Snapchat is leading the way in visual interactions on social networking platforms, with the motto "The quickest way to share a moment." However, there is a risk of the entire system collapsing owing to disputes, intense market rivalry, and, finally, customer demands and choices. So, to reach a broader worldwide audience, companies need to keep these factors in mind. They must prioritize research and development. At the same time, they should be aware of other minor technological advances that may present a significant opportunity in the coming years. With increased competition in the enormous social media sector, businesses are forced to compete by winning over their consumers through improved products, tools, tactics, and marketing efforts.

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