Who is Snapchat for?
Evan Speigel, the CEO of Snap Inc (the company behind Snapchat) has been reported to be rather dismissive towards “poor countries” such as Spain or India. It is unclear to me whether the Spanish have got upset about this, but the Indians (see link above) are definitely miffed and, as a result:
They decided to show their indignation by not just giving Spiegel a piece of their mind on Twitter through the hashtag #BoycottSnapchat, but by also uninstalling the app and leaving a one-star rating on the app before doing the same. Considering how India is the top country to download apps from Google Play Store and has significant clout on the Apple store market too, Snapchat has some serious damage control to undertake. In fact, the app is already has a 1-star rating on the Apple Store!
Tim Worstall has written a nice bit of clockbait over at Forbes stating that Spiegel is right and that
the economics of the company are such that it is indeed something for rich people. Or, if you prefer, he would very much prefer that rich people, not poor, used it. This is all very much tied up with the economics of dual sided markets, part of what won Jean Tirole his Nobel a couple of years back.
The crucial thing to understand here is what is being sold. Yes, sure, Speigel and his team would love to sell you on the use of their app. But that’s not where the revenue comes from, that’s from selling the fact that you use the app to advertisers. And quite clearly advertisers would prefer to be advertising to rich people who have money to spend on the things they’re advertising. This is why a page ad in Vogue costs more than a similar one in the Clacton Advertiser.
I think Tim is not entirely correct here. There may be more rich people in India (or at least rich enough people) than people in Spain or even larger countries. This of course depends on how you run the numbers, however I seem to recall claims that India has 100M (maybe even 300M depending on your thresholds and PPP calculations) of middle class people and I’m fairly sure that Snapchat’s market is the middle to upper middle classes not the 1% super rich. I judge this in large part because I spent a couple of minutes looking at Snapchat’s pitch to advertisers. Looking at the pitch you see lots of mass market brands (Coca-cola, Gatorade, Chase bank …) and no brands that are more, what’s the word? exclusive. There’s no mention of, say, Patek Phillipe or Jaguar cars to name two brands that seem to advertise in magazines intended for the richer upper middle classes and above.
When you think about it, this makes sense. Snapchat’s pitch to advertisers as mentioned in the court case that spawned the whole kerfuffle, was boasting about Daily Average Usage statistics and other similar “eyeball” things without mention of the sorts of metric that suggest interest in the purchasing power of their subscribers. Snapchat was trying to go public (it has just done so) and was (is?) pitching itself as a fast growing company. Fast growing is not usually the pitch one makes if one is seeking to just sign up “rich people”.
Thus it seems to me that Mr Spiegel, if he actually said what is claimed, is being stupidly dismissive of his actual potential customer base. Snapchat ought to be able to sell lots of mass market brand ads in places like India and hence it ought to be seeking to get middle class Indian users. It’s quite possible that Snapchat would want to nail the home market (the USA) before seeking to expand abroad but suggesting that Indians aren’t suited to his product is simply wrong – although it may turn out to be a self-fulfilling prophecy now. Hence when Tim points out that Vogue gets a better class of advertiser than a provincial British paper he’s right but missing the fact that Snapchat more closely resembles the latter than the former.
The Shadow of the Olive Tree