Facebook’s Instagram Burying Snapchat

Print Email

Imitation may not be the sincerest form of flattery, but that’s never been the point of mimicry anyway. A case study may be Snap Inc. (NYSE: SNAP), maker of the mobile app Snapchat, that went public in early March at a price of $17 a share. The stock hit a peak over $29 a share in the first few days of trading, but by mid-June shares closed again at the IPO price and have since sunk even further.

The company has done nothing particularly wrong except fail to find a way to keep other social media players from duplicating its apps. And the winner in duplicating Snapchat’s features is Instagram, the photo app acquired by Facebook Inc. (NASDAQ: FB) for $1 billion in 2012.

Instagram now claims 800 million monthly active users, according to a report in the New York Post. When Snapchat presented results last month, it reported 173 million monthly active users.

It gets worse. Instagram’s stories feature now claims 250 million monthly users, about 45% bigger than all Snapchat’s users. Facebook executive Carolyn Everson also told the Advertising Week conference in New York that Instagram now has more than 500 million daily users.

Snap gets little sympathy, however. In late March, two weeks after the company’s IPO, Fortune’s Shawn Tully wrote:

The Snap IPO was an epic fleecing, made even more glaring by the past two weeks. The lone big winner is the maestro that orchestrated the entire travesty and should be no surprise to anyone: Wall Street. The three other groups involved in the Snap IPO—the inside institutional buyers; the folks who were seduced by the first days’ euphoria; and the company itself—have been huge losers.

That’s the view from Wall Street, but most of Snapchat’s users are not investment bankers, brokers or institutional investors. In a recent survey, researchers at Pew looked at news use across a number of social media platforms. Here’s some of what it had to say about Snapchat:

Snapchat has by far the youngest group of news users – 82% are ages 18-29. While Facebook and YouTube are still the most popular among this age group for news overall, the makeup of the app’s news audience means that about one-in-five (21%) 18- to 29-year-olds now get news on Snapchat.

One reason for Snapchat’s more evenly distributed demographics since the IPO has been its ability to attract top news providers like CNN, NBC and The New York Times to its “Discover” platform. In the past year, the portion of Snapchat users who turn to the site for news has risen from 17% to 29%. That’s well behind Facebook’s 68%, but it is ahead (barely) of Instagram’s 27%.

Snapchat has recently attracted top news providers to its “Discover” platform in an effort to snag older users. According to the Pew survey, of the 30- to 49-year old demographic, just 15% of users turn to Snapchat to get news compared with 36% of Instagram users. Will it be enough to drive new users and, more important, revenues? Stay tuned.

Snap stock closed down 3.5% on Monday, at $13.22 in a post-IPO range of $11.28 to $29.44. The 12-month consensus price target on the stock is $14.74 with a high target of $30 and a low of $8.