StartupTalky

Tag: subscriber loss

  • Snapchat $10 Billion Loss – How Will It Become Profitable?

    As early as a day ago, the news headlines screamed about Snapchat losing USD 10 billion as its stock fell at a 52-week low.  The company lost nearly 40% of its value and reported a net loss of USD 422 million.  This is a consecutive loss after it reported a loss of USD 152 million the previous year as well.

    Snapchat – A Brief
    The Rising Fame of Snapchat
    The Reason for the Loss
    The Future of Snapchat

    Snapchat – A Brief

    Snapchat Inc. later renamed Snap Inc., developed the American multimedia instant messaging app Snapchat. It was created by Evan Spiegel, Bobby Murphy and Reggie Brown, all former students of Stanford University.  Snapchat app became known for representing the new mobile-first direction for social media.  It places significant importance on users interacting with virtual stickers and augmented reality objects.

    Snapchat’s principal feature is that pictures and stories are available only for a short time to their recipients. Over time the app has evolved from a person-to-person photo sharing to now sharing ‘stories’ of 24 hours of chronological content.  It also allows brands to show ad-supported short-form content.  Its privacy includes allowing users to keep their personal photos in a password-protected space called ‘my eyes only’.

    Snapchat exchanges more than four billion snaps a day. It registered a 23% growth last year in its user base registering a total of 293 million daily active users. Due to its popularity among the younger generation, specifical users under the age of 16 years, it has raised privacy concerns for the parents.

    The Rising Fame of Snapchat

    Evan Spiegel, Bobby Murphy and Reggie Brown worked closely together to develop the app, which was initially, launched in July 2011 as ‘Picaboo’. The app was so named due to its feature of disappearing pictures. It was relaunched as Snapchat in September 2011. From thereon, the company turned its focus from branding efforts to usability and technical aspects.

    2012 – Trouble started brewing between the three app developers over the partnership and it took on the form of a legal battle.

    2012 – The CEO of Snapchat, Evan Spiegel described the company’s mission – “Snapchat isn’t about capturing the traditional Kodak moment. It’s about communicating with the full range of human emotion—not just what appears to be pretty or perfect.” He further elaborated and positioned Snapchat as the solution to the stress that was created due to the longevity of personal data on social media

    2012 – This resulted in an increase of Snapchat images sent per second from 25 in May 2012 to 20 million images per day by November of that year.  Within a space of 6 months, users had shared over one billion photos on the Snapchat iOS app

    2012 – Snapchat also released the Android app in October this year

    2013 – A new version 5.0 of Snapchat was released for iOS.  New features were available in this updated version like speed and design enhancements, swipe navigation, an improved friend finder and in-app profiles

    2013 – In June Snapchat introduced Snapkidz.  This app was made for children under 13 years of age.  It was a part of Snapchat and activated only when the user verified their age by keying in his/her birthdate.  This app only allowed users to click photos and draw restricting them to send to other users.  Also, any photos could only be saved locally on the device being used.

    2014 – In September Reggie Brown settled with Spiegel and Murphy for USD 157.5 million and was also credited as one of the authors of Snapchat

    2015 – Snapchat’s users were sending 6 billion videos per day by November

    2016 – In a few short months that figure reached 10 billion videos per day

    2016 – By May of this year, Snapchat had generated strong investor interest and raised USD 8.1 billion in equity offering

    2017 – The app’s popularity had grown its daily active user base of 166 million by May

    2017 – In November Snapchat ran into a spot of trouble when its redesign was not received enthusiastically.  This caused Snap Inc., to lose USD 1.3 billion in market value

    2019 – Snapchat rallied and by the end of the year had ranked as the fifth most downloaded app of the decade

    2020 – Snapchat acquired AI Factory, a computer vision start-up to boost its video capabilities

    2020 – In November Snapchat announced ‘Snapchat Spotlight’.  It declared a total pay out of USD 1 million a day to users posting viral videos.  However, the criteria for a video to be considered viral was not specified, nor was there any clarification on the distribution of the prize money

    2022 – Last month Snapchat announced its plans to launch Snapchat Plus – a subscription-based model.  The subscription will allow its users access to additional features and an ability to change the app icon.

    The Reason for the Loss

    Snap Inc., the camera and social media company went public in 2017 with a share value of USD 27.  In October of 2021 its stock price peaked at USD 83.  The stock saw a deep plunge of 25% just a few days before after the company posted a Q2 loss of USD 422 million.

    The company’s second-quarter investor letter read – “The second quarter of 2022 proved more challenging than we expected, Our financial results for Q2 do not reflect the scale of our ambition. We are not satisfied with the results we are delivering, regardless of the current headwinds.”

    Although Snap’s user base has grown from the first-quarter’s 332 million to second-quarter’s 347 million daily active users, the company’s losses have been attributed to a few broader reasons

    • Increase in cost of revenue – payments to content partners, costs of creating content and inventory costs for Spectacles – the company’s camera-enabled sunglasses.
    • Snapchat’s rejection of USD 3 billion from Facebook resulted in Facebook turning Instagram into a formidable competition to Snapchat. Instagram offers the same features made better than Snapchat.
    • The reduced advertising content on Snapchat is increasing pressure on revenue.
    • Economic challenges mean Snap is facing rising inflation and interest rates, supply chain shortages, labour disruption, policy changes as regards to the platform and, of course, the effects of the ongoing war.

    The company has announced a significant slow-down of the hiring process.

    The Future of Snapchat

    Apple’s change in privacy policy has adversely affected many social media platforms and Snapchat is no exception. In April 2021, Apple announced it would ask iPhone users for permission before allowing social media apps to track their activity. This move is likely to be replicated by Google for Android devices. This move threatens companies like Snap whose revenue is largely dependent on selling smartphone ads.

    However, the company is already on a quest of diverse revenue streams. It has already launched or has begun developing several new features designed to encourage users to buy products from brands within the app. It will allow Snap to earn commissions and increase revenue.

    The company is, although going through a troubled time, by no means finished. It is already ideating and creating new revenue streams to emerge stronger and post substantial profits in the future.

    FAQs

    Why did Snapchat lose $10 billion?

    Apple’s change of privacy policy, tough competition, and rescued advertising content were some of the reasons why Snapchat stocks dropped.

    What is the future of Snapchat?

    The future of Snapchat depends on the new features the app may introduce and its subscription services.

  • Why Netflix Shares Dropped? | Where Netflix Went Wrong?

    As humans, our main source of entertainment has always been movies and series. Two decades ago, television was the main form through which we used to get our daily dose of entertainment. Flash Forward to two decades later, Streaming services have taken the place of television. People are now more into OTT platforms for their dose of entertainment and these streaming services are also serving them with regular movies, series, reality shows and everything that can entertain them.

    Topping the list of streaming platforms is Netflix. Netflix was founded in the year 1997 by Ted Sarados and Reed Hastings. It started offering streaming services in 2007 and since then it hasn’t looked back. There is hardly anyone who doesn’t know about Netflix and hasn’t used it to watch a movie or a series at least once. According to Netflix, they have over 222 million subscribers from all over the world. Therefore, it is not wrong to say that it is the most popular streaming service.

    However, recently the biggest streaming platform has encountered some pretty big roadblocks and somehow they are the only one who is responsible for this. Netflix was eyeing to add 2.5 million new subscribers in the first quarter. However, the opposite happened, Netflix has lost over 200k subscribers in a couple of months and 37% of its shares plummeted in a single day. In this article, we will talk about what has gone wrong with Netflix, why it is losing its subscribers and why its shares dropped for the first time in a decade. So, without any further ado, let’s get started.

    Netflix Share Drop

    “There is a revolution happening, and within two years I think that Wi-Fi and Netflix will be built into all the televisions.” -Reed Hastings

    What Reasons Is Netflix Giving for Share Price Fall?
    Where Netflix Went Wrong?
    What Will Netflix Do Now?

    What Reasons Is Netflix Giving for Share Price Fall?

    After the drop in the share prices, Netflix has given three reasons for the loss of its subscribers and they are:

    Increase in Price

    Netflix Subscription Plans

    Netflix has increased their monthly subscription price in recent times.  UK subscribers are said to be paying three times more for what they used to pay two years ago for the same service. This has created quite a stir amongst the subscribers. Although Netflix said that the increase of the price is to provide more quality content and experience to their customers, the sudden hike in the prices in the UK and Ireland was frowned upon by the public.

    Netflix Exit From Russia

    Just like many other companies Netflix also suspended their operation in the country because of the ongoing conflict between Russia and Ukraine The Russia-Ukraine war is another major cause of the subscriber’s loss of the platform. Netflix stopped all their services in Russia after the country declared war on Ukraine. Over this course, Netflix has lost over 700k subscribers because of the escalation of the war.

    Sharing of Passwords

    Netflix said that the sharing of passwords with other households is also the reason for the loss of subscribers. According to reports, 100 million households are enjoying the streaming service free of cost, with the help of password sharing. As mentioned above Netflix has over 222 million subscribers and these people are sharing their passwords with their friends, extended family and relatives.

    Where Netflix Went Wrong?

    While in this situation, some of the decision by Netflix has backfired and are constantly frowned upon by the customers. Those decisions are:

    From its very existence, Netflix as a platform never included ads in their services and the brand value has always been about improving the customer experience. Unlike other streaming services, Netflix avoided advertising and believed that it could do better business without it. In a sudden shift in the platform’s belief, the CEO of the streaming giant revealed that they are planning to introduce advertising on the platform in one or two years. Contrary to their previous statement where they said they will not use advertisement and. This is going opposite of their brand values as they have always focused on improving the customer experience. This decision came after Netflix was reported of losing over 2 Lakhs subscribers. According to them, it is to lower the price of the subscription.

    Sharing Password Crackdown

    This is probably the biggest blunder the streaming giant has done. As mentioned above, there are over 200 million subscribers of Netflix in the world but along with that 100 million households are sharing the passwords of their accounts with others. Password sharing was never a problem and one of the reasons the streaming platform was popular because of this and how consumer-friendly it was, until now.  Netflix reasons that the increase in their price structure of the subscription is because of password sharing, so to decrease the subscription cost they have decided to stop password sharing.

    Being Insensitive

    The worst thing, a business can do is treat their customers as criminals. As mentioned above, Netflix is on the verge of banning password sharing among households in America. However, before that Netflix is reported to fine accounts in Costa Rica, Peru and Chile who share their password with others. This somehow is quite triggering and seems unfair to certain cultures of the world and is tarnishing the image of the brand.

    Bad PR

    It takes a lot of time to build the reputation of a brand but it takes a second to get it crumbled. Netflix as a brand always focused on customer experience and entertainment. However, the recent news of cracking down on passwords, increasing the subscription price and introducing ads on the platform shows that they have become money-hungry and are not that consumer-friendly anymore. This way, the damage has already been done and the PR of the company hasn’t even done their job properly, which has resulted in such a stir. As they are now changing their core strategy, customers are finding it infuriating.

    Cease to Innovate

    Netflix has been famous for its great and unique content. However, in recent times, people believe that the streaming service has stopped making unique and innovative content. They are creating content that are mundane and repetitive. This way they are forgetting the basic thing that made them successful.

    What Will Netflix Do Now?

    Netflix is right now in deep trouble. There is still no definite answer as to when Netflix will stop losing subscribers. It is the first time in a decade that the streaming giant has received such a blow. In fact, the worse is still not over as Netflix has already said that it will lose more subscribers with the current scenario. By the next quarter, it is predicted to lose 2 million more subscribers. Netflix is currently gearing up to follow its decision of introducing ads on the platform and banning password sharing. However, it is not clear if these two decisions will be able to revive Netflix or it will make it fall more into the abyss.

    Conclusion

    Netflix is submitting itself to the current Global financial situation and thus it has seen a drop in its shares and such a big one for the first time in a decade. Their way of handling the situation and lack of proper PR seems like they are only thinking about their revenue. So their decision of introducing ads and password crackdown make them look like they are shifting from being a customer-centric company to just a money-hungry organization. If proper steps are not taken any sooner, Netflix will lose more subscribers and maybe its USP as well.

    FAQs

    Why did Netflix lose 200k Subscribers?

    Netflix is losing its subscribers because it recently has decided to put a ban on sharing the account passwords by consumers.

    Who is the founder of Netflix?

    Reed Hastings and Marc Randolph are the founders of Netflix.

    When was Netflix founded?

    Netflix was founded in the year 1997 and started its streaming service in 2007.