The photos of Miranda Kerr’s May wedding to Snap Inc (NYSE:SNAP) CEO Evan Spiegel finally arrived in the latest issue of Vogue magazine July 16. The CEO took time out from his social media battle with Facebook Inc (NASDAQ:FB) and Snapchat’s other social media competitors to get married to the love of his life.
Mazel Tov!
However, from a business perspective, I have to wonder about their decision to put the photos on Instagram — one of the social media apps that could put Snap out of business, ultimately sending SNAP investors scrambling to buy FB stock, if they already haven’t.
Now before I get a bunch of emails reminding me that Miranda Kerr’s Instagram account promotes her brand — something I applaud — it does put a spotlight on the incredibly difficult hill Snapchat is trying to climb.
Facebook’s Dominance Continues
SNAP stock is about 12% lower than its March IPO price, and about 40% from its first day of trading. Meanwhile, FB stock is up 16% in the same period. Millennials — big buyers of Snap’s shares — are getting a big lesson in investing, which is that products or services that are popular don’t always translate into money making stocks.
It’s possible we naysayers will be proven wrong, but the odds are very long indeed.
Two recent articles by InvestorPlace contributors Chris Lau and James Brumley hammer home the enormous gap that exists between the two companies. First, Chris Lau:
“Instagram Stories now has 250 million daily users. Nearly a year after adding the Stories feature, usage is growing sharply,” Lau wrote July 17. “Facebook will invariably benefit from the strong numbers. It could even take Snap and Twitter customers away, thanks to the strong traffic numbers.”
Let’s be clear: Lau is talking about Snap advertisers in the second part of the above paragraph, not users.
While I understand that Kerr and company want her 11.4 million followers to see her wedding photos, is there not another way to quickly disseminate them without resorting to Facebook-owned Instagram?
If the answer to that is no, the jig is already up for Snapchat. It truly is, as some in the media have begun calling it a “dead stock walking” because with Instagram Stories passing Snapchat in daily users — 250 million to 166 million — it’s only a matter of time before advertisers begin defecting.
Now, if the answer is yes, I’d like to know what it is. Maybe Snapchat should buy that instead of spending as much as $550 million on two apps (Zenly and Placed) that do little to grow Snapchat’s user base. Because honestly, what’s the point of Snapchat if it can’t provide photos of its CEO’s wedding for all of us to see?
Facebook’s Three-Pronged Attack
Advertisers will soon have three venues to advertise with Facebook: Facebook, Instagram and Messenger. That’s right. Facebook is putting ads in Messenger conversations, an audience that numbers 1.2 billion regular users.
“The real threat to Snapchat and upside for owners of Facebook stock is that it offers choice,” Brumley wrote on July 16. “Snapchat, conversely, is one-dimensional with considerably less customer data (than Facebook) and considerably less experience gathering that data. That’s just not enough scale for the average advertiser to get excited about when a far more proven Facebook offers a three-pronged opportunity.”
My colleague hit the nail on the head. Why would any advertiser use Snapchat when Facebook gives them an entire buffet of ad venues?
They wouldn’t. And they won’t.
Bottom Line on FB Stock
As tech stocks go, Facebook is one you must own, because until companies don’t need advertising to sell their products and services, Facebook’s revenues and profits are going to keep rising. It’s the premiere social service on the planet, and no challenger looks even remotely poised to displace it.
Don’t waste your time with Snapchat. Even its CEO knows Instagram is the app to use for getting your pictures out to a broad audience.
As of this writing, Will Ashworth did not hold a position in any of the aforementioned securities.
