Activating Network Effects: Snapchat

The term network effects is the definition of a product, service or platform that becomes increasingly used and therefore increases in overall value. Within these effects are different types, these are direct, indirect, local network and cross-network. Snapchat uses a few of these types and this will be discussed in more detail within this post.

Snapchat is an photo sharing application available for both the Google Play Store and the Apple App Store. The concept of the application is quite simple, a user adds another friend or “snapchatter” via their Snapchat username and can quickly send short videos, photos or text which instantly vanish after viewing.

Direct Network Effects

Snapchat has had a great example of direct network effects, with one of them being the sheer volume of user’s who have adapted to Snapchat in a small period of time. The application was launched back in September 2011 and since then has skyrocketed to almost 100 Million monthly active users. [1]
With this the value of the company and application has grown tremendously and has created a snowball effect with many more joining to interact with friends and family through Snapchat.

This effect is similar to many other large internet based companies or platforms that have have become successful in the marketplace. For instance YouTube launched in 2005 and shortly after was purchased by Google for $1.65 Billion USD and then six years later merged with Google Video.

Indirect Network Effect

As snapchat has generated a large user base an realistically a very short time span the company has adapted many new ways to harness this new found opportunity. This slowly started with the addition of Snapchat Stories. This new found feature allowed “Snapchatters” to quickly and easily add multiple photos and videos to their story that will be visible for 24 Hours. These photos and videos are showed in order that the Snapchatter has added them, thus creating the concept of a story. Any other user that has added the Snapchatter can see this Story and playback easy Snap an unlimited amount of times within that 24 Hour window. Since this rise over 1 Billion Snapchat Stories are viewed every day. This feature then spawned a whole new unforeseen opening allowing Snapchat to unlock this feature to other paying companies for their snaps to be viewed under their own stories, thus creating Snapchat Discover.

Cross-Network Effect

Cross-Network Effects are the ability for another party to benefit from the rise of Snapchat. This in particular can be related in many ways. Firstly, other companies using the Snapchat Discover to promote their company or Snap will receive a higher amount of exposure as snapchat receive more users. As well as this many use their Snapchat accounts for business or financial gain, promoting themselves, their lives or even their products on their Stories for all of their follower to see and view. As more users connect with them and come to snapchat the more possibility the promoter’s business can flourish due to the extra publicity.

Local Network Effect 

This effect can be taken many different ways in regards to Snapchat. Personally I find the most applicable being that as Snapchat grows user’s can expand their connectivity with other users, celebrities or even have a larger Discover network. The reverse is also possible with user’s having the possibility to have more follower’s or “worth” within the Snapchat community.

Issues

Snapchat is a game changer when it comes to the social networking marketplace and with over 400 Million snaps being sent back in 2013 alone [2] and does show that this kind of market has potential. Though it does not come without it’s issues. One large issue is the anonymity behind a user’s Snapchat profile. Pictures or Videos can be sent and shared without prior consent or even added to a Snapchat story within their friends group to view for 24 Hours. As well as this user’s can easily screenshot a video or photo, though the sender does receive a notification, nothing is stopping the recipient from sharing this further.

3 thoughts on “Activating Network Effects: Snapchat

  1. Hi Matt,

    I really enjoyed reading your take on Snapchat and their ability to implement different network effects.

    I think it’s interesting you mentioned Snapchat stories in your article, because this was one of the first things that popped into my mind. As an avid user of Snapchat myself, one of my favourite features is checking the stories, but not of my friends but of those stories that Snapchat compile around world events.

    If you didn’t know already, when users upload stories with specific filters (for example, State of Origin or Soccer World Cup) they get added to a pile of photos which can be viewed by anyone in the world. So although you mentioned the use of business tools as a cross-network effect, I think an even more appropriate example is the fact that by having more users at one place uploading a video, another subset of users get a value-added experience.

    Debatably, it’s hard to decide wether this is a cross-network effect and that their are two subsets of users, or its a direct network effect as anyone can post a Snapchat story. What do you think?

    Michael

    Like

    1. Hey Michael,
      I wasn’t aware that snapchat did this! It’s an interesting way to show a collective group of people in a standard platform.
      I agree though, it’s a fine line. I guess if you would be correct in saying they are a sub set of users because not all users who gain this benefit in the end.

      Like

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