Amazon-Snapchat Partnership Expected to Substantially Impact Snap Inc.'s Future Business Prospects

Online commerce constitutes a huge portion of all merchandise being purchased, and each year, the proportions keep increasing. While some people prefer to go into a store to actually feel an item or try on some clothes before making their purchase, services like Amazon Prime make it easy and convenient for consumers to shop online, then return anything they don't like, free of charge. With a feature that was recently added to Amazon's app, which allows a user to take a picture of an item in the real world in order to search for it on Amazon, the online market will continue to grow exponentially. Interestingly, although Amazon already has this feature on their own app, according to Sam Dean's L.A. Times article, the corporation has recently partnered with Snapchat to give the social media app the same shopping capabilities.

Economic analysts are unsure as to what Amazon's end goal might be. The corporation already has an app capable of leading a user to an item for sale based on a captured image. Why does Amazon want to add the same feature to Snapchat's app? Similarly, what could Snapchat possibly be getting out of the deal that it makes it worthwhile for them to use their platform to help an indirect competitor like Amazon? The explanation for Snap Inc.'s end of the partnership is simple: money. Online platforms that push business in Amazon's direction get between 1% and 10% of the sale price of a purchased item as a commission. So, the more Snap customers purchase on Amazon (which can be improved with this image-recognition feature), the more money Snap Inc. can bring in.

For Amazon's side of this partnership, no definite conclusions have been drawn. Some believe that Snapchat has a user base that is significantly different from Amazon's, to the extent that the benefit of increased sales would far outweigh the cost of adding the feature to Snapchat's app. According to a study, over three-quarters of all internet users between the ages of 18 and 24 use Snapchat, and that demographic tends to be much more likely than the average consumer to make online purchases on a whim. Others believe that this partnership is part of a far larger plan on Amazon's part. History has shown that when Amazon partners with a smaller company, they tend to only play nice until they fully understand the company's business model, at which point they put them out of business.

Alternatively, this tentative partnership could be a plan on both sides to improve the odds of a peaceful transition of ownership in the near future. Snap Inc. recently hired Tim Stone (a long-lasting executive at Amazon) as Snap's Chief Financial Officer. Also, because of Facebook's blatant copying of Snap's intellectual property over the years, if Snap executives were ever to consider liquidating the company, they would likely strongly oppose selling to Facebook, their business enemy. So, it isn't unbelievable to think that Snap might be gearing up to sell to Amazon soon, and this update to Snapchat's features could be their first step in testing such a combination of the companies.

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Snap Inc. IPO Jumps 44% on First Day

Snapchat has, since its release in September of 2011, continuously updated and found new ways to attract its expanding base of users. Most recently, the company was planning on adding functionality to help users find their friends and stay updated during emergency situations. From funny videos to reality-distorting filters, Snapchat has stayed technologically in tune enough to keep boosting demand and stay competitive with other social media networks. This week's L.A. Times article by Tracey Lien, Paresh Dave, and Nina Agrawal detail's Snap Inc.'s initial public offering (IPO) and what it means for the company as a whole.

On Wednesday, Snapchat's stock was priced at $17. Within 24 hours, it leaped to a closing price of $24 on Thursday, where it had peaked at $26 for a short time. That 44% gain is the kind of "pop" that can indicate massive success for a new stock offering. It usually means that the stock is in high demand among investors. However, it could also mean that the company purposely "left money on the table," setting the stock at a price lower than it was worth.

Analysts found that Goldman Sachs, Morgan Stanley, and other big investment banks had orders for 10 times the number of shares Snap was willing to sell, so they could easily have charged more than $17 per share in order to make extra money. However, in raising the cost per share, they risk reducing demand. While one or two dollars extra per share would have been unlikely to have any significant impacts on overall demand, if Snap had chosen to open at $22 or $23 per share, the market would probably have shown much less interest, and it's possible that the stock would have busted.

To many investors, it's far more impressive for a company's stock price to rise rapidly than to stay steady at an already-high price. It was a smart plan for Snap Inc. to set their stock price at a lower level, giving it room to grow. There is a possibility that if they had started it high it may have ended even higher, but in all likelihood, people would have shown much less interest in the company and not bought at such high levels. Either way, however, investors are unhappy if prices fluctuate too much from their original levels. Whether they start high and drop or start low and pop, investors become concerned. Therefore, the best way for a company to keep its investors happy is to try to predict a stock price that will stay steady through its IPO.

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Snapchat's Planned Updates Expect to Expand User Base

In late 2011, a group of Stanford students came together to develop a new kind of social media platform, which they called Snapchat. Snapchat was unique in that it aimed to allow virtual communication with the same level of emotional range that one might expect from an in-person conversation. To accomplish that goal, Snapchat was designed to be impermanent in that all messages, pictures, and videos sent through the app would be deleted after the recipient had viewed them. The new concept took the social media world by storm and brought in many users, especially among the teenage to early twenties demographic.

Eventually, however, the buzz died down and many users became bored of the concept, turning to standard social media platforms like Facebook and Twitter for their day-to-day use. Snapchat kept updating their software, adding features to make it more interesting to use, but some people didn't see a purpose in sharing 10-second blurbs of their life. It wasn't until late 2015 that the company made a big change that brought in so many more users: filters. Their filters gave users the ability to change their appearance, voice, or background, thereby making photos and videos more of a fun experience to share with friends. Since then, Snapchat has been continuously adding to their supply of filters, getting more and more detailed by the day. Most recently, as Paresh Dave described in his L.A. Times article, Snapchat is making another big change, a search bar that will make the platform that much more similar to competitors like Facebook.

Besides the fact that the new update seems to stray from the company's original plan to be different from other social media platforms, the search bar seems to be a great addition. Not only will users be able to look up friends by name, they will also be able to efficiently find celebrities and companies that they want to follow. Additionally, all users will have the ability to send their Snaps to the company for the chance to be featured publicly, a feature that was once limited to specific locations and events. Perhaps the coolest part of the new update involves the use of artificial intelligence to identify objects or people in public videos. In that way, a user could choose to view any Snap containing a specific product or featuring the image of a politician or some other famous person.

Because Snapchat is now allowing public submissions from anyone around the world, they are making their users happy and are granting themselves access to far more content. If users are willing to send in their own funny or thought-provoking images and videos, then Snapchat doesn't have to invest money into coming up with their own. Their AI will sort the Snaps based on event or location, which could be helpful for real-time coverage by real people in the event of a natural disaster or local emergency. All of these changes to the app seem to be timely and will hopefully be quite effective in both helping the company grow and allowing users to connect easily.

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