Snapchat CEO's alleged comments of India being too 'poor' for the company's expansion costed the social media company dearly. Not only did its shares plummet by 1.5% and wiped off Rs 1,923 crore ($289 million) in its market cap on Monday last week, but fuming Indian Netizens took Twitter to boycott Snapchat and devalue the app on the App Store.
While Snapchat denied that their CEO Evan Spiegel said that it came from a disgruntled ex-employee, it did not help diffuse the anger of Indian users.
However, it is not difficult to see Spiegel making such a statement as the company in their US Securities and Exchange Commission (SEC) filing before its IPO on the US markets saw the company clearly outlined its strategy to grow and focus on top 10 markets of mobile and digital advertising. And India isn't one them.
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”. 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.
Snapchat 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.
While India is one of the fastest growing advertising markets, it is still not among the top 10 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.
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 a SEC filing.
While Spiegel seems to have its eyes set on the target, he seems to have lacked the foresight in seeing India's potential to emerge within the top 10 in the next year. In 2016, India missed out on entering into the top 10 advertising markets list as it clocked in an Adex of Rs 55,671 crore (about $8.6 billion) and was in 11th rank just behind Canada. In fact, a mid-year forecast in 2016 of Adex by Magna Global put India at the 10th rank in the global advertising markets.
However, at the end of the year, Canada's Adex was bit higher at $9.05 billion in 2016 in comparison to India, which was expected to grow to Rs 57,486 crore (over $9 billion) in 2016. But demonetization took its toll on ad spends during the last quarter which brought it lower. However, India, which has been consistently growing in double digits over the last few year, is now expected to grow by 10% in 2017 to Rs 61,204 crore ($9.4 billion). This could possibly put it in the top 10 league of advertising markets globally.
Besides this, the turmoil in other western markets such as Europe and North America has led to slower growth over the last few years and could possibly see lower growth in their Adex.
IRONY AT PLAY
- While India is one of the fastest growing ad markets, it is still not among the top 10 globally
- Turmoil in Western market has led to slower growth, can see lower Adex growth
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