Here's why Snapchat's Spiegel isn't interested in India
Snapchat got on the wrong side of many Indians as its CEO Evan Spiegel's alleged comments in 2015 regarding his disinterest in expanding the business to “poor countries” like India and Spain.
Netizens in India were incensed at the comments and asked for users to boycott and uninstall the app.
Snapchat, however, denied the comment and said that it came from a disgruntled ex-employee.
The damage has already been done and led to the app being downgraded to 1 star rating on App Store almost immediately.
According to the SEC filing before its IPO on the American markets, Snapchat clearly outlined its strategy to grow and focus on top 10 markets of mobile and digital advertising.
The company said that its primary revenues will come from brands and companies advertising on its platform.
This is the reason why Snapchat is focusing more on countries with higher ad spends on mobile and digital spaces rather than monetising its user-base.
Clearly, advertising revenues chase users who have the ability to spend more.
Snapchat further said that its primary users are in the age bracket of 18-34 years. Although, this is also an age group with most active users in India on social media platforms such as Facebook, Instagram and Twitter which Snapchat competes with across the globe.
The company in its filings with the US Securities and Exchange Commission (SEC) said that one of the factors that could negatively affect user retention growth and engagement as “we, our partners, or other companies in our industry are the subject of adverse media reports or other negative publicity” and “we do not maintain our brand image or our reputation is damaged”.
Snapchat, which monetise their daily user engagement primarily through advertising, said that the factors mentioned above “could reduce their advertising products, which may lower the prices they receive, or cause advertisers to stop advertising with them altogether. Either of these would seriously harm our business.”
Snapchat's revenues grew to $404,482 by the end of December 2016 from $58,663 a year back, but also saw its losses grow to $514,643 in 2016 from $372,893 a year ago.
However, there is a reason why Spiegel thinks that India is not an exciting market.
As its US SEC filing said, “Our ability to grow our revenues depends in large part on our ability to increase ARPU (average revenue per user) in top advertising markets”.
It further says that their user are concentrated among the top advertising markets.
While India is one of the fastest growing advertising markets, it is still not in the top 10 advertising markets globally. In 2016, the advertising expenditure (Adex) of the US was the maximum $190.84 billion, followed by China at $80.24 billion, Japan $37.68 billion and UK at $26.1 billion.
Advertising expenditure in the world's largest ad markets in 2016 (in billion US dollars)
Snapchat further quoted an IDC report saying that the global advertising market is expected to grow from $652 billion in 2016 to $767 billion in 2020, with the top ten countries commanding over 70% of overall worldwide advertising spend and nearly 85% of mobile advertising spend. This illustrates it concentration only on the top 10 advertising market.
Even Canada, which is at No 10 spot in the Adex global market, is a market that is keenly looked at by Snapchat.
“We benefit from having over 60% of our 158 million Daily Active Users come from countries on this list, including over 60 million Daily Active Users in the United States and Canada, and over 10 million Daily
Active Users in the United Kingdom,” it said in the filing.
India's Adex in 2016 was Rs 55,671 crore (about $8.6 billion), according to a GroupM report. In comparison, Canada's Adex was bit higher at $9.05 billion in 2016. India's Adex is expected to grow by 10% in 2017 to Rs 61,204 crore ($9.4 billion).