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Expert Advice for High-Growth Businesses

Snapchat Shows SMBs How to Deliver Results

Julie Zisman
Senior Director, SMB

Today, there are no shortage of companies aiming to make a big splash in the marketplace and on Wall Street. Intriguing ideas abound, and technology offers new and often remarkable ways to create value.

Yet rising above the crowd remains incredibly difficult for SMBs. More than a few firms with jaw-dropping ideas—and sometimes amazing products or services—fall short of expectations. They make a quick splash, and then vanish.

Contrast this with the recent initial public offering (IPO) for Snapchat. This rising star garnered plenty of hoopla and headlines. Investor buzz over Snapchat, famous for its unique brand of instant video messaging, pushed the stock up 44 percent at the end of its first day of trading. Simply put: it was an enormously successful launch, even though the company hasn't yet turned a profit and its growth rate is slowing.

Some observers may scratch their heads and wonder how a company with no record of financial success can capture the hearts and minds of Wall Street. Yet, Snapchat isn't just an addictive social media app. It has built a business model that mines data and puts it to work, proving that its ads connect with its audience. As a result, investors are betting that the app—which might more accurately be described as a technology platform—will emerge as a powerhouse in the months and years ahead.

The Road to Disruption

How does a company like Snap, Inc. (Snapchat’s parent) achieve superior performance? How does it transform clicks and views into dollars? And what does it take for other companies to adopt an underlying IT framework that supports digital innovation and transformation?

Although there is no single route to success, Snapchat offers two valuable clues for how to tap digital disruption and make it work in new and innovative ways.

Have an Innovative (and Multifaceted) Product

Today's social media users—especially younger ones—like Snapchat’s idea of capturing a photo or video, enhancing it with text, drawings, coloring and more, and sending it to a friend or family member. A few seconds later, the picture or video vanishes. It's also possible to purchase add-ins that boost the creativity quotient.

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Meanwhile, media outlets and businesses can create channels that deliver news, information, entertainment and more in short bursts of animations and videos.

Use Data Strategically

Snapchat excels at strategically sprinkling ads into content. This process didn't happen accidentally. The company turned to Oracle to develop an IT and data framework that accurately gauges the impact of Snapchat's ads. Using the Oracle Data Cloud and other tools and partnerships—including Nielsen and Google DoubleClick—Snap, Inc. has built a robust metrics-and-data-centric business model. As a result, 92 percent of advertisers using Snapchat have experienced an increase in in-store sales. This spans brands in a variety of industries: cosmetics, personal care, cleaning, packaged food, and beverage brands.

To be sure, the partnership with Oracle transforms the lofty and often elusive vision of analytics into a viable strategy. By combining offline sales data with leading-edge analytical tools, it takes ad performance to a place where few companies can go. The result: actionable and valuable data that helps Snapchat assess where an advertiser derives the greatest return on investment. This drives the ecosystem and, ultimately, Snapchat forward.

Do Snapchat’s Learnings Apply to Your SMB?

Other SMBs should play close attention. Even if your SMB isn’t a Snapchat or Facebook, the same basic rules apply. When an organization develops a rich and varied product base, continues to innovate, scales systems for growth, and puts data in play at maximum velocity, the odds for success grow exponentially.

The challenge for Snapchat is whether it will transition into a profitable company like Facebook or become a question mark like Twitter or GoPro. The latter two companies enjoyed enormous IPO success but soon saw their stock prices lag (GoPro went public at $24 per share, surged to $100 per share in only three months, but today hovers just below $9). For Snapchat, the next couple of years are crucial.

Yet for now Snapchat has designed a business and IT framework—with clouds, real-time data, and advanced analytics—that serves as a framework for business success in the digital world. It's starting out with strong footing.

If you want to innovate and disrupt, your SMB must have a digital framework in place to make it happen. If you want to succeed as an IPO, you must have information technology in place that supports profits and performance—but delivers the level of agility and flexibility paramount for digital business. Anything less will make you a one-hit wonder.

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