May 28, 2017

SnapChat and Instagram in Artful Battle for Marketing Spends

On the very day (April 13th) that Facebook’s Instagram Stories announced over 200 million daily users, shares of rival SnapChat dropped 1.2%. This is a notable dip in the continuing downward drag of SnapChat’s stock since the company’s historic IPO on March 1st. And the recent announcement of “Snap to Store, which mimics Facebook’s location based ad-targeting capabilities to increase retail sales, likely won’t slow Instragram’s user and ad revenue.

As noted here a few days after the IPO, Facebook had already fired shots at SnapChat. Advertisers have seen their SnapChat marketing ROI slump due to poor targeting, unreliable performance measurement and a decrease in both user engagement and open rates. The recent launch of Messenger Day, seen by some as a SnapChat Stories clone, has already snagged over one billion users for Facebook. Combining that with Instagram’s 300 million daily active users, Snapchat has a big challenge in building on both its projected 2017 seventy million user market share and $900 million revenue increase.

But what make this far most intriguing is that this digital media clash began in December of 2012 with Mark Zuckerberg inviting SnapChat CEO Evan Spiegel to Facebook’s Silicon Valley headquarters to get to know one another. Zuckerberg had swallowed up Instagram 9 months earlier for $1 billion and had been mocked from all corners of the internet. Ever the rebel, Spiegel said that the media giant overlord would have to fly to his hometown in sunny LA.

As Forbes’ January 2014 Profile of Spiegel so eloquently point out, the battle thus began:

And so, armed with the premise of meeting with architect Frank Gehry about designs for Facebook’s headquarters, Zuckerberg flew to Spiegel’s hometown, Los Angeles, arranging for a private apartment to host the secret sit-down. When Spiegel showed up with his co-founder Bobby Murphy, who serves as Snapchat’s chief technology officer, Zuckerberg had a specific agenda ready. He tried to draw out the partners’ vision for Snapchat–and he described Facebook’s new product, Poke, a mobile app for sharing photos and making them disappear. It would debut in a matter of days. And in case there was any nuance missed, Zuckerberg would soon change the large sign outside its Silicon Valley campus from its iconic thumbs-up “like” symbol to the Poke icon. Remembers Spiegel: “It was basically like, ‘We’re going to crush you.’”

Spiegel and Murphy immediately returned to their office and ordered a book for each of their six employees: Sun Tzu’s The Art of War*.

In what would soon after be Spiegels rejection of a whopping $3 billion offer, Zuckerberg launched an all-out aggressive strategy in the photo-sharing space and it’s been nothing but victories for him ever since.