Whether users like it or not, Snap Inc. is quietly becoming more like its competitors in the buildup to its hotly anticipated initial public offering.
In an effort to generate more revenue and meet its billion-dollar goal for advertising revenue, the company has opened its gates to third party data. Recently, the camera company inked a deal with Oracle Data Cloud, which will empower marketers and advertisers to target tranches of users based on activity conduced outside of the Snapchat app.
This move is intriguing for two main reasons: it runs directly counter to previous statements by CEO Evan Spiegel and it's sure to boost revenue for the startup in its pre-IPO run.
Spiegel claimed he would never want Snapchat to become a home for ads he dubbed "creepy." He was referring to his experience seeing products advertised to him that he searched for days prior, a common occurrence for internet users everywhere who don't use the appropriate blockers.
Given Spiegel's hard stance on this (and the recency of it), this move will largely be seen as hypocritical by privacy advocates and the more observant users, but given the current inefficacy of the platform's ads, it's unlikely to significantly turn off any users, especially since they can opt out of the data sharing as desired.
That said, this change does make Snap look more and more like its rivals, Facebook and Twitter.
The shift in ad strategy does not exist alone in a vacuum, though.
Snap has been mired in a few controversies lately. First, the company is going to face some massive scaling problems, akin to Twitter around the time of its IPO. Its approach for generating ad impressions has been broken for some time and it lacks an algorithm, which forecasts a struggle for optimizing the audience impressions.
Additionally, Snap was slapped with a wrongful termination suit from an ex-employee who claims he was fired for not helping the company misrepresent its user engagement numbers to the public.
Snap has a lot of damage control and soul-searching to do before its IPO and sneaking a major change like this on users doesn't provide great optics, but it serves to grow revenue faster and hit that $1 billion revenue mark and justify a potentially $25 billion IPO.
A Long Road Ahead
Probably one of the most talked-about pieces of tech news for 2017, this IPO is one of the most anticipated of the last few year. $25 billion is an objectively huge number and the Snapchat app doesn't appear to offer the monetization necessary to justify that price tag.
Opening Snapchat to outside data aggregators is a good first move, strictly speaking in terms of revenue growth. If advertisers can use information on users' buying and browsing habits, they can make better decisions on their ad buys and receive more valuable impressions.
More valuable impressions mean that Snap can eventually raise the price point (assuming user engagement doesn't go south) and generate more revenue. As well, more companies will be enticed to advertising on Snapchat if it means widespread, proven engagement.
The road ahead is an arduous one for the LA-based startup to reach its IPO already, but the problems Snap has with monetization and justifying its immense valuation leave it strewn with pitfalls and land mines. Spiegel and his team will need to carefully evaluate their strategy moving forward if they want to validate $25 billion of public investment.