On Thursday, Snap Inc. shares dropped up to 8% after a tweet from social influencer Kylie Jenner expressing disinterest in Snap’s social media app, Snapchat. Jenner is thought to be a key influencer of Snapchat’s primary demographic.
The biggest social media and social networking site today is Facebook, with 2.1 billion monthly users. However, the social media giant has seen slowing growth in its user base as younger demographics, particularly “teens and tweens”, have begun to drift towards other platforms such as Instagram and Snapchat.
Snapchat was started in 2011 by Evan Spiegel, Bobby Murphy, and Reggie Brown. The app was novel at the time of conception. Not only was it available exclusively on mobile devices, it included a messaging feature where text or photographs sent would disappear almost instantaneously. According to Snapchat’s 4th Quarter earnings report, the app has 187 million daily active users. Facebook attempted to acquire Snapchat in 2013, but was unsuccessful.
Snap. Inc has seen come controversy since its conception. In 2014, the Federal Trade Commission alleged that Snapchat’s privacy statement did not inform consumers about the possibility that images sent may not be immediately removed from server storage. Last April, the company’s shares fell by 1.5% due to outrage from users after CEO Evan Spiegel allegedly told Variety that he was not interested in expanding to “poor countries” such as India and Spain. An update later that year sparked concerns from parents and security officials over its “Snap Map” feature, which allows users to track other people’s locations. Snap Inc. went public last March.
Following a tweet from reality TV star and social influencer Kylie Jenner, Snapchat lost $1.3 billion in market value on Thursday. Wall Street shares initially dropped by 8.4% to $17.08, which is close to the company’s Initial Public Offering (IPO) of $17. At closing, shares were down 6%.
“Sooo does anyone else not open Snapchat anymore? Or is it just me… ugh this is so sad,” Jenner tweeted on Wednesday. She later added, “still love you tho snap… my first love.” Jenner, who has 24.5 million followers on Twitter, is not the first to criticise the app following a new update and changed interface. A petition on “change.org” has received over 1.2 million signatures for the app to withdraw its latest update. The company has ignored negative feedback, stating that users “just need time to get used to it”. Hours before Jenner’s tweet, makeup company Maybelline asked its users whether or not it should continue using the app. In October 2017, it was predicted that Snapchat’s advertisement revenue would begin to slow.
Some observers pointed out that 25.95% Snap’s floating shares (available for trading) are on short interest—loaned to sellers who are predicting a fall in value. Analysts such as Citigroup’s Mark May recommended that shareholders sell, due to the possibility that user engagement would fall after negative reviews.
Even as stocks fall, CEO Spiegel announced on Thursday that his paycheck was $637.8 million – of which $636.6 million is from stock grants. This is one of the highest packages received by a US CEO.
Our assessment is that the market was responding to Jenner’s influence over Snapchat’s key demographic, the “Millennial” generation. However, we also believe that Snap Inc.’s performance on Thursday was exemplary of the sensitivity of the stock exchange in recent months. Snapchat shares have been unpredictable, rising to an unexpected high earlier this month only to fall close to IPO. We had earlier predicted that markets might see a downwards slump, unless corrected this year.