Social media investors can be as faddish as teenagers. When Snapchat was released a decade or so ago it was dismissed as little more than a sexting app. Popularity with users then prompted the biggest tech market listing since Facebook. Within months it was written off as a Wall Street flop. Now it is back in demand. Its return has lessons for Elon Musk’s impending ownership of Twitter.
Wind back a few years and it was not clear that Snapchat’s parent company, Snap, would survive. Instagram had taken its best features and turned them into a glossy app with a billion users. By early 2019, Snap was leaking money. Shares traded below the price they had listed at two years earlier and bets against the company were mounting. By my estimate, it had about three years to turn things round before it ran out of cash.
Three years on and the company has managed to do just that. It has improved its digital advertising business and shored up its finances. Focusing on small groups and private messages has helped it to reach 100mn more users than Twitter. Its user base is growing faster than Facebook’s.