Snapchat's Simple Float Question -- Will Millennials Learn To Be Loyal?

As the float of the year approaches, we can expect to see a lot of claims about Snapchat, such as today's assertion from Snaplytics that half of the service's users actively engage with advertiser stories. It's an odd name for an analytics company, which may  suggests it is focussing on Snapchat numbers alone, so I'm not entirely sure how much weight I want to treat their findings with.

However, the latest figures from Verto Analytics show what the float all comes down to. The bet for investors is whether a Millennial audience, which Snapchat has had for a year or two, will remain loyal and provide the type of growth Facebook has seen as users have stuck with it through the years. Or will young people in a couple of years' time have another new, hot platform to message one another through?

The killer stat for Snapchat's popularity is the doubling of influence for among Millennials. Users age 18-24 account for 35% of the services users, but 70% of the time spend on the platform. This same age group accounts for just 8% of Facebook time, 16% on Twitter and 43% on Instagram. Clearly, Snapchat is far and away the Millennials' preferred social, message and photo-sharing service. Plus, it's "sticky" for them too, as nearly half of all users log in every day. That's way above Twitter and Instagram, although below Facebook.

There are very clear demographics here. Snapchat is way out ahead as the Millennials' favourite, and Facebook pretty much owns the attention of anyone in their thirties and older. Its only near competitor for anyone over 45 is Twitter. As you would imagine, the older generations' use of Snapchat is almost too small to bother measuring. 

Interestingly, time spent on Snapchat has dropped in the last year by an hour a month from five and a half hours to just under four and a half hours. This is still very impressive compared to Twitter and Instagram, but fades against the near 13 hours the average Facebook users spends with the service each month. 

So, Facebook is used a heck of a lot, typically by Generation X and older, while Snapchat is not used quite as much but is definitely the main game in town for reaching Millennials. 

The conclusion from Verto Analytics is that there is a real gamble here for investors. Facebook and Google have built services that span generation and channel divides. Snapchat has attracted a huge Millennial following over the past couple of years, and how loyal and lucrative that following turns out to be is the big question mark. Twitter did something very similar with over 35s, with a slightly younger skew than Facebook -- but that turned out to be disastrous as far as the float and future returns happen to be. 

If you were going to pick a demographic, there's no point going after those 35 and over, because they are already very well catered to and loyal users of Facebook and Twitter (that pretty much sums me up, I don't know about you). So Snap is truly bringing something unique to the market. It's the main channel for a young demographic that hasn't routinely followed peers on to Twitter and Facebook. Whether that user base will remain loyal is quite another thing. 

If I were an advertiser looking to reach Millennials, I would bite their hand off, or at least I would check the channel out in the hope it becomes a mainstay of my media plan. As an investor, however, there is one heck of a risk betting on a company that hasn't made a cent in profit and is relying on young people to repeat history and decide to flock to a new social platform that older peers are not on.

My reaction, then, is a little like Dragon's Den or Shark Tank, if you prefer. Quite often the rich investors will say it's a product they would happily buy but they're not so sure about making an investment. Use it, yes. Own it, not so much.

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