Business Model deconstruction
The business model is considered a mandatory resource for an organization to ensure feasible planning of the functional dimensions of the business. The business model canvas provides adequate flexibility for outlining the significant aspects that can contribute to the sustainability of the organization (Furukawa, 2015). The following assessment is aligned to evaluate the business model of Snapchat through the deconstruction of the nine building blocks of its business model canvas. The report would illustrate the company description followed by the business model canvas and key relationships that exist among the various components. Furthermore, it would also be insightful to reflect on the critical success factors for the sustainability of Snapchat as well as the reasons for downside risks for the business. Finally, the assessment would present recommendations for changes in the BMC based on inferences derived from the evaluation.
Snapchat Inc. was established in 2011 and was then transformed into Snap Inc. Snapchat is the primary product of the company which is a web-based camera application that facilitated communication through the use of images and short videos. The founders of the company are Bobby Murphy and Evan Spiegel and the organization serves the social media market alongside the advertising business (Snapchat.com, 2018). The primary products of the business include Spectacles and Snapchat alongside the Bitmoji app. The services of Snapchat include the Chat Service, which provides the facilities of text-based chat conversations, group chat, stickers, video and voice calling, and stickers and Bitmojis (Snapchat.com, 2018).
The business model canvas for Snapchat could be deconstructed from the perspective of the nine building blocks used in the tool which are reflective of functional aspects of the organization’s business.
The first building block in the business model canvas of an organization could be identified in the customer segments which are associated with a specific persona. The customer segments include young impulse-buyers, online users within the age group of 13-34, and business advertisers (Glova, Sabol & Vajda, 2014). Online users within the age group of 13-34 are characterized by explicit and frequent engagement with social media platforms. Advertisers are characterized by the objectives of improving the outreach of a business through interacting with a large audience base. As per Izak, Mansell & Fuller (2015), the objective of advertisers is related to the young impulse buyers as the latter are prompted to purchase products based on the visual appeal of products on social media (Izak, Mansell & Fuller, 2015).
The value propositions involved in the business model canvas (BMC) of a company could be recognized through the resolution of specific queries. Value propositions are determined by evaluating the value delivered by the company to customers in its products and services. According to König et. al.(2017), the value proposition is also dependent on the specific issues of customers addressed by the organization alongside the precise product and service offerings facilitated to individual customer segments (König et al., 2017). The value proposition of Snapchat includes references to the remodeling of camera applications to improve the approaches to communication and life for people. The products and services of Snapchat facilitate opportunities for people for free expression alongside coming in contact with other people and having an enjoyable experience while doing so. The provision of ‘Snap’ i.e. images and short videos are responsible for fulfilling the user’s needs to communicate with other individuals on the platform (Laing & Laing, 2016).
As per Müller & Vorbach (2015), the channels block in the business model canvas is associated with the primary characteristics of the approaches through which the customer segments can interact with the organization as well as the existing measures followed by the company for reaching customers (Müller & Vorbach, 2015). The description of channels in the BMC could also be responsible for defining the superiority of channels in terms of cost-effectiveness and outreach as well as prospects for integration between the channels. The channels that are observed in the business model canvas of Snapchat primarily include the Snapchat App and Spectacles. Other significant channels include APIs, Publisher tools, vending machines, partners, App marketplaces, and advertising.
Customer relationships are described in the BMC thorough evaluation of the individual relationships with individual customer segments and integration of the relationships with the remaining aspects of the business model. In the case of Snapchat, the customer relationship block comprises primarily of ‘Snaps’ for relationship management (Nillesen & Pollitt, 2016). The application is integrated with the camera of the user’s device and is characterized by the privilege for the user to select which images or short videos could be added to a ‘story’ for public viewing among followers of the user on the platform. The customer relationships of Snapchat also include options of sending private ‘snaps’ or short videos and images to other users directly.
Revenue streams in an organization’s business model could be identified from the value that customers are willing to pay for the products and services as well as the avenues of payment. The evaluation of the revenue streams block of BMC would also involve the recognition of the contributions of each revenue stream to the overall revenue. The permanent source of revenue of the parent company of Snapchat is through the provision of access to users to advertisers in exchange for payment (Ouyang, 2014). The company is liable for 30% of advertising revenue in case the advertiser sells the ad space and the share is increased to 50% if Snapchat sells it. The advertising products that are provided by the company include sponsored creative tools as well as Snap Ads that account for the revenue of the organization.
The key activities of an enterprise highlighted in the BMC are reflective of the entities required for the provision of value propositions alongside the management of customer relationships, distribution channels, and revenue streams. The key activities of Snapchat could be recognized in the aspects of R&D, public relations, IT operation, software development, marketing, customer service, platform development and maintenance, product roadmap, and management practices.
Key resources involved in the business model canvas of Snapchat include the financial capital, the user base of Snapchat involving almost 150 million Smartphone users, features for image enhancement, the photo messaging app ‘Snapchat’, and the video-sharing sunglasses Spectacle’. Other key resources involve the publisher tools that allow users to modify the short videos and images before publishing for public or private viewership (Müller & Vorbach, 2015).
The key partners involved in the BMC of Snapchat include the Snapchat community, API partners, investors, audience match partners, and Ads partners.
The cost structure of an organization is also a comprehensive highlight of the business model canvas. The cost structure of Snapchat emphasizes key costs associated with its operational infrastructure and reflects on the aspects of marketing, communication, platform development, staff, product roadmap, advertising, IT systems maintenance, operations, offices, and Help Centre as well as taxes (Nillesen & Pollitt, 2016).
The key relationships that can be identified among the building blocks of Snapchat’s business model canvas can be identified in the customer segment and value propositions. The customer segments in the 13-34 age demographic are provided with the value proposition of flexible and interactive communication while the advertisers could capitalize on the customer segment persona of young impulsive buyers (Ouyang, 2014). Another significant relationship between the building blocks could be identified in the key activities which are related to the channels, revenue streams, and customer relationship blocks of the canvas. The customer service and public relations activities are related to customer relationships while IT operations, R&D, and Software development are responsible for contributing to the revenue streams (Izak, Mansell & Fuller, 2015). Furthermore, the activities of marketing and product roadmap could serve as a prolific influence on the channel block of the canvas.
The foremost critical success factor for Snapchat would be emphasized adaptability to changing trends in social media consumption behavior. The sustainability of social media platforms is largely dependent on the engagement of the user base on respective platforms. Therefore, Snapchat should focus on data analytics that provides insights into the trends in social media consumption that can help in tailoring content to the requirements of all involved customer segments (Glova, Sabol & Vajda, 2014).
Snapchat should also focus on integration with other social media platforms which have proved to be a promising measure for other social media sites such as Facebook which acquired the messaging app ‘Whatsapp’.
Content moderation is also a primary requirement with the increasing focus on censorship. The refinement of the publisher tools could contribute to drastic reforms in the options available to users for publishing content. This factor should be supplemented by the explicit transformation of technological infrastructure (Laing & Laing, 2016).
The features provided by Snapchat in its services are also accounted as major reasons for the organization’s success. Therefore the features should be expanded to provide additional functionality to partners, users as well as advertisers that can contribute to the improvement of revenues.
The downside risks for Snapchat in its business model could be derived from the competition with prominent social media giants, lack of permanency of content, and concerns about security and cyberbullying. The lack of appropriate monitoring infrastructure for analyzing the nature of content shared through Snapchat accounts to numerous complaints of cyberbullying and emotional abuse (Izak, Mansell & Fuller, 2015). The competition with large social media giants such as Instagram could be complicated further with the lack of features for the permanency of content. The self-destruct feature of Snapchat could be accounted as a downside risk as compared to other platforms which are also associated with the concerns of content ownership claimed by Snapchat.
The reform in the business model canvas of Snapchat could be associated profoundly with the key activities and revenue of the organization. The revenue stream of Snapchat is explicitly dependent on advertising which is accomplished through tailoring advertisement products according to the requirements of users. However, the revenue stream should also focus on the provision of additional facilities and features with the products that can be characterized by examples of personalized content publishing tools. The key activities of Snapchat should also include focusing on data analytics to address the objectives of understanding social media consumption behavior trends precisely. Therefore, the business model canvas of Snapchat was found to comprise functional elements that have contributed to its success.
Furukawa, S.W., 2015. Deconstructing the Taikō: The Problem of Hideyoshi as Postwar Business Model. Mechademia, 10, pp.81-96.
Glova, J., Sabol, T. and Vajda, V., 2014. Business models for the internet of things environment. Procedia Economics and Finance, 15, pp.1122-1129.
Izak, M., Mansell, S.F., and Fuller, T., 2015. Introduction: Between no future and business-as-usual: Exploring futures of capitalism. Futures.
König, M., Gudd, G., Ungerer, C. and Baltes, G., 2017, June. Business model validity in early-stage technology ventures’ business plans testing agreement between text and reality. In Engineering, Technology, and Innovation (ICE/ITMC), 2017 International Conference on (pp. 930-937). IEEE.
Laing, C.L. and Laing, G.K., 2016. The student-as-customer metaphor: A deconstruction using Foucauldian constructs. Australasian Accounting Business & Finance Journal, 10(1), p.40.
Müller, C. and Vorbach, S., 2015. Enabling business model change: Evidence from high-technology firms. Journal of Entrepreneurship, Management, and Innovation, 11(1), pp.53-75.
Nillesen, P. and Pollitt, M., 2016. New business models for utilities to meet the challenge of the energy transition. In Future of Utilities Utilities of the Future (pp. 283-301).
Snapchat.com. 2018. Snapchat – The fastest way to share a moment!. [online] Available at: https://www.snapchat.com/ [Accessed 21 Mar. 2018].Order Now