Snapchat’s IPO signals new chapter in its war with Mark Zuckerberg

The longstanding rivalry between the founders of social upstart Snapchat and Facebook’s Mark Zuckerberg is heating up as the Facebook-backed Instagram manoeuvres to head off Snapchat’s ascendancy as the social platform of choice for teens and millennials.

That battle was given an added sense of urgency last week when Snapchat’s parent company, Snap Inc., launched its initial public offering (IPO), achieving a $US24.53 per share closing price and public market capitalisation of $US28.4 billion ($37.7 billion).

While some analysts said Snap Inc presented some issues in regard to slowing rates of user uptake for Snapchat, other analysts forecast a stronger outlook for the company based on its innovative approach to user engagement technologies and strong position among teens and millennials.

Snapchat’s rise in popularity has been dramatic and has rung alarm bells at Facebook headquarters. According to Statista, Snapchat has tripled its average active daily user numbers in the past two years, going from around 50 million in March 2014 to 150 million by June 2016. The most recent data puts Snapchat’s daily active user numbers at 161 million.

But even more important than sheer numbers is the fact that Snapchat has become such a firm favourite among younger users, with teens and millennials heavy users of the app. This has made Snapchat a target for Facebook, and especially its photo-sharing app Instagram.

There’s no doubt Mark Zuckerberg and the Facebook brains trust see Snapchat as a threat, not so much to the overall dominance of Facebook, but to Facebook’s share of younger users.

And if younger users drift from Facebook, which is increasingly seen as an older person’s network, towards Snapchat that could jeopardise Facebook’s ongoing attractiveness not only to young users, but also for brands and advertisers keen to connect with that group.

Zuckerberg’s interest in Snapchat is not new. He was so keen to head off the rise of the ephemeral snap app that he has reportedly tried to acquire Snapchat twice, including a $US3 billion offer in 2013. Zuckerberg’s overtures were roundly rejected by Snapchat founders Evan Spiegel and Bobby Murphy.

At the time, Spiegel signalled Snapchat had plenty of growing still to do:

“There are very few people in the world who get to build a business like this … I think trading that for some short-term gain isn’t very interesting.”

That short-term gain was estimated at around $US750 million each for Spiegel and Murphy, which shows just how serious they are about Snapchat’s future.

Snap Inc’s IPO seems to have vindicated the decision by Spiegel and Murphy to resist Zuckerberg’s advances over the past few years.

But that’s not the end of the story. Zuckerberg will continue his war on Snapchat and its encroachments into his social empire, taking the fight to Spiegel and Murphy principally through Instagram.

Businesses and brands looking to connect with a youthful demographic will have to keep an eye on this space, as both Instagram and Snapchat are likely to roll out features across areas like video and virtual reality over the next few months.

With the boom in video consumption and massive uptake expected for virtual reality experiences, whichever platform can get these things right looks set to score a major win against its opponent.

Fi Bendall is chief executive of The Bendalls Group, a business that leads STRATEGY : ADVOCACY : MOBILE delivering the business acumen to drive effective positive results in a disruptive economy for the C-suite. Fi has received a Westpac/AFR 2015 100 Women of Influence award.