Media Musings: Who Will Buy Snap Inc?
As outlined in our 2019 forecasting report, MIDiA predicts that Snap Inc. as we know it will be no more by the end of 2019. Its most notable asset Snapchat still has a sizeable audience among younger demographics but the company will be most likely acquired by a larger entity. Below are a range of scenarios as to how this might play out:
Big Tech: Snapchat famously rebuffed Mark Zuckerberg’s advances for an acquisition of the company back in 2014, and given Instagram and Messenger’s product iterations since then it seems Facebook have been imbued by a strategic impetus of neutralising Snapchat as a social media competitor. Given the success of Instagram stories, it is unlikely Facebook would be back in for Snapchat at this stage, yet there are valid reasons why two Google and Amazon would be interested in Snap Inc. Google’s in house efforts around social never gained meaningful traction (although YouTube has some limited social functionality it was an acquisition). Leveraging Snap Inc’s camera-centricity would allow Google to reach into an area of data where they are presently lack dominance and would also allow the company to shore up its product search functionality. This is important to Google and parent company Alphabet as a whole, due to Amazon’s advertising division increasingly gaining search revenue against products, which remain the most valuable search terms in digital marketing. For this reason, Amazon may simply seek to enchance their e-commerce offering by acquiring Snap Inc, especially as the two companies already having partnered in the past.
Telco: Verizon is the potential challenger here. They need to consider content partnerships and expanding their direct distribution if they are to compete with AT&T since their recent Warner Media acquisition. Acquiring Snap Inc. with the purpose of using Snapchat as a value added service would allow them to compete on a level playing field where their competitors such as AT&T, T-Mobile, Comcast are less invested. Since net neutrality was effectively repealed by the FCC, Telco’s are now-state legal challenges permitting- theoretically able to throttle data to direct to consumer service platforms such as Instagram while offering subsidised zero data weighting access to a Snapchat subsidiary thereby optimising the service consumer experience and raising switching costs for Verizon mobile subscribers so directly increasing their competitive advantage.
E-Commerce: A wildcard however could be Walmart. The world’s largest retailer has already demonstrated their deal making appetite to spend big on e-commerce tech acquisitions following their $3.3billion acquisition of ecommerce disruptor Jet.com in 2016. Taking a bet on directing Snap Inc’s base away from the temptations of the Amazon ecosystem could convince Walmart management to take a bet on the company. Using Snap Inc. as a purchasing portal could bring a younger demographic to Walmart and help to define their brand in direct contrast against the older consumers of exisitential competitor Amazon’s Prime subscriber base.
Snap Inc’s own situation is perilous. However, while growth has slowed, it is easy to forget this is a company with an engaged, sizable audience in a demographic most of big tech (save for Instagram) do not effectively monetise. Therefore Snap Inc may ultimately end up in a kingmaker scenario as other companies attempt to size up against Facebook and Amazon.