Successful social media startups don't get an offer like what Snapchat got from Facebook often. Instagram, a similar startup, was valued at $1 billion and bought by Facebook, but Snapchat was allegedly valued at three times as much and refused the offer. Why Snapchat refused the offer and what they have in plans for their future is unclear and up for speculation, but the reason Facebook wanted to small social media app that could is something easier to uncover. Facebook has been losing their teen demographic recently, the demographic they grew from and cater their advertising to. Watch today's Brown Bag to learn more about why Facebook is losing their precious demographic, how it contributes to their interest in Snapchat, and why this is all so important in the world of internet marketing.


Hello, and welcome to The Daily Brown Bag. Today, we’re going to be talking about Snapchat and the recent attempt to buy them by Facebook. I’m Chad Hill, and I’m joined by Adam Stetzer.

Yeah, welcome, everyone, to The Daily Brown Bag. So, we’re talking about Snapchat today. Perhaps you haven’t heard of it. It’s definitely something for the younger demographic. But, they’re in the news today because they turned down a $3 billion from Facebook, and that does not happen every day. So, we wanted to get into this a little bit and understand just what’s going on. Why would Facebook be offering such a large sum of money for Snapchat? Well, here’s what’s going on, Chad. The teens on Facebook are increasingly turning away from the platform, and this is a new phenomenon. Snapchat is one of the places that they’re going instead, and I think this is a little bit startling and definitely is news here, because Facebook has traditionally been seen as the place young people want to be. So, we have some new data here that I think is pretty interesting. A recent Global Web Index Survey revealed that in Q3 of 2013, this year, only 56% of U.S. teens said they were active on Facebook. That sounds like a big number, it’s over half, but for comparison, in the first quarter of 2013 that number was at 76%. So that is a significant migration in just a few quarters, and on Facebook’s latest earnings call, the CFO even admitted that they’re losing the teen demographic. So, this is interesting.

The enthusiasm for Facebook is waning among a key, younger demographic, and some of the reasons were found in Pew’s Research in May of this year who asked, “Why is your enthusiasm for Facebook waning in this key demographic?” They said, and I think you’ll find this entertaining, Chad, “Well, there’s too many adults on the platform, there’s too much drama on the site, and managing their online reputations on the platform is becoming stressful.” I don’t know. That’s just fascinating to me, because we know the internet has no memory. We’ve seen this happen on Facebook, and now its turning into a real business problem for Facebook. So where are they going? Well, another Pew study said they’re looking for other applications. Ninety percent are using U.S. cell phones and Snapchat. Twenty-six percent of adults are using Snapchat, and the reason Snapchat is appealing is that it’s one of these applications where you can share movies and pictures and do chat, but it has no memory. Things disappear within 24 hours, and their numbers are skyrocketing. Last year, Snapchat had 10 million photos per day. Now, as of September, two months ago, its users were sending 350 million photos per day, which is starting to rival some of the numbers and the intensity we see on Facebook.

First of all, I think this is actually smart. The teens are actually starting to acknowledge that managing their online reputation is important and that placing all this information in the hands of a company like Facebook that becomes part of your permanent record is not really that smart. So, I do notice when I’m talking to younger people that they are much more aware of the privacy settings in Facebook than I am, probably because they’re trying to do this, and like you said, it is stressful. But, let’s talk about this from Facebook’s standpoint. Clearly, they want this teen demographic on the platform, they’re offering $3 billion, they made a big move when they bought Instagram which was also a huge purchase for them, but they know there’s two issues here. One is that they want to continue to expand their dominance in the mobile platforms. They’ve made some good in-roads there with recent product innovations they’ve had as well as their acquisition of Instagram, but they need to continue that. These platforms are where it’s happening. Snapchat is something that works on iPhone and Android, and that’s important.

The second thing is that they want to make sure this demographic is there. A couple of interesting stats came back in terms of what teens are looking for. They want some ability to have these messages disappear, which is important to them. Now there’s a risk there. Are they really disappearing or are these being stored somewhere? So, that’s a legitimate concern that we still don’t know about. The other thing that Snapchat has run into is that they have had some trouble with lawsuits involving their founders and they’ve had a sexting scandal. So, there’s some other noise here about whether this platform is any better than being on Facebook. But, it is an interesting trend that, essentially, teens don’t want to be where their parents are, and as their parents come to Facebook, it makes it a little less desirable of a platform for them.

Right, and it seems like the fulfillment of what a lot of us predicted, which is that when Facebook was free and hip, it could attract this demographic. But as soon as it turned the corner and became public, had more of a monetary incentive, and was courting businesses, the number of business pages started growing, introduced business reviews on Facebook pages they started going after demographics that maybe spend more disposable income, and they lost their hip value. The teens were going to desert. So, I think there’s a fair amount of this about which you could have said, “I kind of saw this coming. I didn’t know it would be this particular platform, Snapchat. I thought it might be What’s App or Group Me or one of these other ones, but it seems like the natural evolution.” But, I think the broader takeaway is really interesting. Facebook seems like it’s a relatively recent phenomenon and that its just arriving and trying to monetize, and here we are already seeing them confronting disruptive technologies and shifts in the desire for social media privacy, particularly around a key demographic.

It makes me wonder what Google is going to do, too, because they’re playing catch-up with Facebook with their Circles product and their other social, even though Facebook might be facing some of these problems. Fascinating to watch this happen and evolve, and it does make you realize that if you think you’ve got this nailed and you understand the social platforms, it’s going to change and it’s going to continue to evolve. These are young technologies, and this all needs to be proven out, particularly on the privacy settings side where we’ll continue to watch it. We’d like your thoughts on this. Are you active on Facebook? What kind of experiences have you had there that make you think the idea of disappearing content might be a good idea? Maybe the teens are onto something. Once again, we’re glad you came to our Brown Bag. We’re here every day, we hope you’ll subscribe to our YouTube channel, and we’ll see you Monday.