Snapchat as an innovative service

Table of contents

Introduction

Characteristics of Snapchat
Definition of the service
Main features
Market-creating capacity
Successfulness of the innovation

Business model evolution
Snapchat 1.0
Snapchat 2.0
Snap Inc. and the years to come
Novel dimensions of the service

Sectoral competitive environment
Means of appropriation
Existing competitors in the market

The demand
Diffusion rate
Target market and current and future customers
Perceived service quality

Concluding remarks

References

Appendix

Introduction

This project provides a summary of our presentation given in the course Innovation in Services. Throughout the paper we utilise theoretical frameworks discussed during the course Innovation in Services to describe and analyse the development of Snapchat as an innovative service. In the following we introduce the characteristics of Snapchat, its innovative features and evolution. We analyse the sectoral competitive environment, the demand and how it has influenced diffusion of innovation as well as prospects.

The company Snapchat Inc. was founded by Evan Spiegel and co-founders Robert Murphy and Reggie Brown in September 2011 (Colao, 2014). Today, it delivers the most popular app among teenagers in the United States, and was valued by investors at $18 billion (Lavalle, 2016). In 2016, Snapchat Inc. changed its name to Snap Inc.. The evolution of Snapchat has gone from an instant photo messaging app to becoming a brand network, a marketing platform, as well as live stream media. In short, the platform has morphed into combining the best of social networks, magazines and television in an omni-entertainment app.

Characteristics of Snapchat

Definition of the service

In 2011, Snapchat Inc. created an instant messaging app for sending self-deleting photos with the intention of allowing users to share short-lived images. At the time, the app and its user- interface was a clear novelty to the market. From here the services of the app evolved. First, a set of channels were introduced that featured curated content, articles and videos produced by top publishers: Discover was born (Snapchat Support, 2016). Second, Our Stories bundled snaps (snap messages, red.) from users at events and locations around the world. Examples range from the Oscar Awards to a ‘Campus Stories’ (ibid). Third, Geofilters On-Demand (self-made filters, approved by Snapchat) enabled users to customise their geographical location filter for their photos (ibid).

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Figure 1: Introduction of Snapchat features

Main features

Snapchat has elements of a personal service; it delivers a recreational amusement to the users of the app. One could argue that it also has elements of the distributive service category as it has a communicative element and the app is used as a mean of communicating instant moments. However, as these two services require a network, we categorise it as a network- based service (Vargo & Lusch, 2004). Snapchat’s business model developed into the capitalisation of its network, which presents us with evidence of this, as well as the diversification of activities done with the curated media content and the Spectacles (glasses launched by Snapchat, red.), only possible due to the power of the network in place.

Intangibility, heterogeneity, inseparability and perishability

First, intangibility is referred to as the lack of palpable or tactile quality of goods (Vargo & Lusch, 2004); services cannot be touched. However, many services does have a tangible result. In the case of Snapchat, the app is the most tangible feature of the entirety of the service but can hardly be defined as tangible. The app functions as it is the distributor/user interface of the service. Second, heterogeneity is described as the relative inability to standardise the output of a service in comparison to goods (ibid). Snapchat is homogeneous in the company’s perspective, as the service provided is scalable and the same to all users, but somewhat heterogenous on the user side, as each user has the ability to personalise his or her own experience and produce somewhat original output. Traditionally, this combination would enable Snap Inc. to enjoy the benefits of economies of scale by delivering an homogeneous service without minimising the importance for users’ desire for customisation (ibid). Third, inseparability is particularly unique for services; it refers to inevitably simultaneous production and consumptions of the service and opposes the sequential view of production and consumption of services (ibid). However, according to the aforementioned definition, the service is highly separable as the production and consumption do not occur simultaneously. For example, content on Discover and Stories is available for 24 hours, and chatted content is saved until consumed. Hence, Snapchat mirrors the service of Facebook or Google: a social platform, whose production is spatially and geographically separated from the consumption of its users. Fourth, perishability is the notion of inability to store the service (ibid), the production and consumption is simultaneous and hereafter the service ‘disappear’. In the case of Snapchat the evidence of the concept of perishability is pretty clear: the photos disappear after a maximum of 10 seconds. However, these videos or photo messages can be replayed, screenshotted and also saved in the photo library prior to sending them, which somehow weakens the perishability dimension for the service.

The later introduction of features diminished the perishability and separability of the service. Perishability is relatively higher in the initial offering, self-deleting image-messaging. However, the introduction of the replay function of snaps messages and the entertainment aspect lowered the level of perishability. The same goes for the latter mentioned: original features are highly inseparable (production and diffusion of owned content by the user) whereas the third party content by media partners (e.g. Discover) is increasingly separable.

Market-creating capacity

Snapchat stepped onto the scene offering a new bundle of desired features related both with communication and entertainment: it introduced a novel way of getting access and sharing content that shifted consumer’s expectations, competitors’ behavior and therefore created new markets. We argue that Snapchat had a market-creating character as defined by Berry and colleagues (2006), through a “controllable convenience” service due to new delivery benefits (its platform and network effect resulting) that can be enjoyed in a flexible manner, at any time and place (ibid).

There is a positive correlation between market-creating innovations and the potential success of the innovation (Berry, L. L. et al, 2006). The dimensions to examine refer to 1) the type of service offered (in which the innovation may reside in the core benefit or the delivery format) and 2) the degree of service separability (ibid). Snapchat’s network-based bundle of recreational amusement service and entertainment is essentially a core service that is also offered by competitors such as Facebook or Instagram. Hence, the service must be superior in perceived quality for the customer to generate demand and create new markets, i.e. a growing market of the younger population. Snapchat’s innovative dimension also resides in the service delivery (ibid); the platform’s features constantly evolve. This adds to its recreational character, keeps the user engaged, and increases both size and value of the network. Similar to other companies providing services through platforms, such as Facebook, Snapchat offers free-of-charge user-generated, and company or media-curated content that is constantly available (the latter constitutes Snap Inc.’s income source).

Successfulness of the innovation

The innovation has indeed gained momentum with its users counting over 100 million daily active users, 8796 photos shared every second and 6 billion videos watched daily (The Storyteller, 2016). The success of the innovation can be measured through 9 key drivers, which consider all aspects of the business (Berry, L. L. et al, 2006). Five of them are crucial for service innovations*. We argue that Snapchat only exploits some. Regardless, the service is successful as it positions itself in the “inseparable cells”, and gains a competitive advantage through continuous innovation and not necessarily direct customer service (ibid). Additional important drivers for services are elaborated on the the table below.

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Business model evolution

As of its foundation, Snap. Inc has introduced several features and services to its initial core service. During this evolution, the business model has undergone a dramatic development. In order to understand the novelty of the services that Snapchat delivers, we first introduce the development in the business model. Hereafter, we describe and analyse Snapchat’s systematic introduction of innovative features. We cluster the evolution of their business model into three different stages as illustrated in the figure below.

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