Issue of the week: Is Snap the next tech titan?
“When Snapchat first became popular in 2013, many thought the messaging app would disappear almost as quickly as its vanishing messages,” said The Economist. Instead, it captured the imagination of tens of millions of Millennials. Now its parent company, Snap, is poised to go public in March at an expected valuation of roughly $20 billion, the biggest initial public offering for a U.S. tech company since Facebook. But unlike that social media juggernaut, which strives to create a record of its users’ lives, “Snapchat offers liberating impermanence.” Users love that they can share impromptu pictures and videos with groups of friends without worrying about them living online forever. About 41 percent of Americans ages 18 to 34 use Snapchat every day; about 161 million around the globe open the app daily.
“Snapchat may be a messaging app, but in many ways, it’s also a new kind of television,” said Christopher Mims in The Wall Street Journal. Snap reports that its users watch 10 billion videos a day. Often, these videos are no longer than 10 seconds, but they are typically strung into slide shows lasting several minutes, in a feature Snapchat calls Stories. If you have enough Snapchat friends, it feels a lot like the “lean back” experience of watching TV. As a result, Snap has a golden opportunity to capture some of the $71 billion a year that goes to TV commercials. Nielsen reported a 37 percent decline in the amount of time 18- to 24-yearolds spent watching TV between 2010 and 2016. That age group is “Snapchat’s core demographic.”
Sure, but does that make the company worth $20 billion? asked Shira Ovide in Bloomberg.com. Having 161 million global users is actually not very big “by internet standards.” Snapchat’s growth rate is slowing, making it unlikely to catch up to Facebook’s 1.2 billion daily users. The strategy of almost all big advertising-supported internet companies— including Facebook, Twitter, and Google—is to go for sheer size. Snapchat plans to buck that approach and “go for niche rather than mass,” selling pricier ads and keeping its dedicated users coming back dozens of times a day. It’s an unproven strategy; hopefully investors recognize that. For some reason, Snap “has the valuation of a company that has figured all this out.”
Snap wants Wall Street to think it’s the next Facebook, even though its numbers make it look a lot more like Twitter, said Kurt Wagner in Recode.net. Snap lost more than $510 million last year; Twitter lost $79 million the year before its IPO, and five years later it still isn’t profitable. Facebook, by comparison, was making $1 billion in profit before it went public. It also doesn’t help that Facebook has a knack for copying Snapchat’s best features, said Brian Barrett in Wired.com. Snapchat’s growth plummeted more than 80 percent last August after Facebook launched a clone of “Stories” on Instagram. Perhaps it’s no surprise then that Snap recently branched out beyond social media with its photo-taking glasses, Snap Spectacles. The only way for Snap to win completely might be “to play a different game.”
Reading between the economic lines
The New York Times
There’s something important the current economic data isn’t telling us, said Neil Irwin. “If you’re an economic technocrat,” the official numbers look pretty great: Unemployment is low. The economy is growing. And wages are rising faster than inflation. But “your countrymen, it is amply clear, do not agree.” Polls show nearly twice as many Americans think the country is on the wrong track as think it’s on the right one. Apparently, “something is rotten in many people’s economic lives that hasn’t been picked up by the headline data.” But what, exactly? One school of thought argues that “the economy has become too volatile and uncertain.”
The rapid pace of globalization and automation has made some people spectacularly wealthy, while leaving others behind, especially those without an advanced education. In this view, the economy has “become too dynamic for its own good.” On the other hand, there are those who argue that the economy isn’t dynamic enough, with far fewer new businesses being formed and greater market concentration in top industries. Both theories probably have elements of truth. But, “as the seismic political events of 2016 make clear, the data alone may not tell you much about how the economy looks to millions of people.”
Big government always wins
President Trump has pledged to slash regulations, shrink the federal bureaucracy, and run the government like a business. He wouldn’t be the first, said Stephen Mihm. For the past century, presidents of both parties have vowed to shrink the government; nearly all “have failed.” Efforts to streamline the work of Washington arguably began in the early 1900s, when President Theodore Roosevelt created the Committee on Department Methods, charged with enforcing efficiency across the burgeoning federal bureaucracy. The campaign went nowhere, and its successors have fared no better. “Not even antigovernment crusader Ronald Reagan was able to lessen the regulatory burden in any significant way.” During Reagan’s presidency, despite his vow to curb runaway regulation, the Code of Federal Regulations grew from 107,109 pages to 117,480. The code had crept up to more than 138,000 pages by 2000, despite another efficiency push during the Clinton administration. “Can Trump triumph where so many stumbled?” The president is already issuing exceptions to his federal hiring freeze. His “simplistic” executive order calling for two regulations to be eliminated for every new one will likely be quickly undermined. Big government has survived 100 years of attempts to shrink it by both Democratic and Republican administrations. There’s no reason to think it won’t outlast this one.