The Take

Oh Snap!28/03/18

QUTEFS’ Secretary Rebecca Levine discusses the ongoing ‘war’ between Snap Inc and Facebook’s Instagram and the effects it has had on social media stocks’ market capital, in this weeks edition of The Take:

 Snapchat (Snap Inc.) and Instagram (owned by Facebook). These titans of social media are a huge part of many people’s lives with research showing that we spend 2.25 hours on social media per day. But the idea that these kinds of platforms are in fact money making machines is an idea that has only entered the general end users minds in recent years. Now with Facebook and Cambridge Analytica set to begin a showdown with the US government that could change this wild west of money and data forever, let us look back at the rivalry and how it has changed the way we view social media forever.

The inevitable and apparent never-ending battle between Snapchat and Instagram has been a controversial topic for end users for what feels like an internet ‘decade’. The gauntlet was thrown in the ancient past of 2016, when Mark Zuckerberg (co-founder and CEO of Facebook) announced that Instagram would be releasing stories. This escalated when Snapchat released its unpopular update, which saw Snapchat’s stories page become the Discoveries page – merging branding, celebrity, and friend’s stories into one page, while doing away with the chronological order of the previous iteration.

Despite the plea of end users manifesting in a change.org petition, and a 1.3 ‘star’ rating drop overnight, the update looks set to stay. However, this can now be interpreted as a beacon that signals the beginning of a tumultuous time in social media, one that would see the end users themselves enact a direct financial impact to Snapchat’s equity capital.

Snap Inc – a fledgeling corporation that relies on a financial model involving users, social media influencers, famous names, and artists connecting and interacting on their platform – allowed an interactive post to be released to the public relating to the 2009 domestic violence assault of Rihanna. The response that came from Rihanna, posted via competitor Instagram story, once again caused Snapchat’s app rating down this time to a measly 1.8 on the Apple and Android stores.

 

Left: Rihanna’s response, Right: The original Snapchat post

 

However this time, in addition to the app rating decline, Snapchat stock plunged nearly 4% during trading, equating to around US$800 million in market value. While this isn’t the first time a public figure coming out in the media to pan a company or product has caused significant harm to a company’s stock, it is usually a financial or economic figure that has caused the drop. This would prove a significant moment in the following weeks for Snap Inc’s executives and investors, as Snap shows how social media company’s stock prices become intricately tied to the influencers who use (or more importantly snub) their platform.

To illustrate this point further, a tweet made by another social media influencer, Kylie Jenner, the month before the Rhianna controversy, contributed to a Snap Inc stock fall of 6% in a single day, equating to around US$1.3 billion in market value. This occurred after Kylie called the app out publicly to her 21.5 million followers, implying that she doesn’t use the platform anymore. The well-known tweet received 333 thousand likes and had over 70 thousand people talking about it.

Kylie Jenner Tweet

While some might argue that the difference between Snapchat’s floundering and Instagram’s success comes down to a difference in experience levels of the company’s leadership, the incidences of the past few months make it clear that social media doesn’t only play significant role in the world of 2018 politics, but exert a significant influence on financial markets as well.

Overall, it is safe to argue that these events may be the beginning of the end for the Snapchat v Instagram saga, with likely victory going to Instagram. Research by The Next Web a technology media company, showing that views per Snapchat story have decreased about 40%. Moreover, The Next Web stated that marketing platforms are seeing 28% more open rates for Instagram stories when compared to Snapchat stories.

With all of that said, the potentially longer last effects of this ‘war’ of the social media platforms may be this new found monetary power influencers have over the markets. As illustrated in the graphic below, highlighting Snap Inc stock with the events described above.

Snap Inc closing prices v. social media influencer events

 

What is your take on this war between Snapchat and Instagram? Did you sign the petition?

Rebecca Levine is the Secretary at QUTEFS, a former Deloitte Operations Vacationer, and a former Ernst & Young Game Changer. Rebecca is a social media aficionado currently on exchange in Germany, and is looking forward to writing more in this space on this topic as the story unfolds.  If you are interested in writing an article for The Take, contact publications@qutefs.org.