Porter’s Prophecy of Snapchat & the attack of his 5 Forces

It is very interesting to see that Porter was right and will remain to be right even in this internet age. In this article I am referring to the framework called Porter’s Five Forces that was devised in 1970 by Michael Porter (If you’re a business graduate, I’m sure this is a Hallelujah moment). At that time, it perfectly explained how competition in Steel industry transpired. Today, I shall illustrate how it explains competition in the Social Media “industry”.

 

The Incumbent’s usual vices

When a particular industry gains popularity and displays potential, it attracts more players. This is good for the consumers, because it leads to more choice and less cost (in short). But it is obviously bad for the incumbents aka big players already in the market. So they set up “Barriers of Entry” – things like Patents, Unmatchable Ad Spends, Predatory Pricing, etc. However, historically, in most cases, the player who is looking to enter the market (New Entrant) usually uses a trump card called Innovation and nudges his way in or sometimes even create a whole new market.

 

So, what was Snapchat’s Innovation?

We all know what Snapchat was used for before it went mainstream. But that image was soon shed as more people realized about the one awesome thing that Snapchat offered that none of the other social media did – the absence of your entire family. Liberation. Finally!

Not only were you free of family, you can also post freely without scrutinizing every single aspect of the post, trying to come up with the most profound caption that goes with every mundane aspect of your (boring) life. It also very much was a consequence of our fear of “missing out”. What if, god forbid, I miss sharing how my cat knocked over a bowl of cereal. (Cats knock down bowls of cereals all the time, don’t wait for a punch at the end, this is not a Meme!)

Then there are the fun filters! Not only should I see your cat, I should now see you as a cat – what fun. Nevertheless, people do not realize that Snapchat is actually collecting facial data. An app that was primarily used for disappearing pictures building a database of people’s faces. The irony. All they have to do now is to play Jig Saw puzzle, if you catch my drift 😉

 

Nullifying Innovation

One of the primary defenses that an incumbent can employ against a new entrant is to become the grandest player in the market – Consolidation. Facebook bought over – Instagram and WhatsApp. So basically all your images and text. Now they have expanded their database and further, know all of us a little better. For example, in a country like India, more people are using Whatsapp than Facebook on a daily basis.

Next step that Facebook did was to make Snapchat a simple feature on its already existing platform that was easily adopted by its hugh user base. Not just that, but they also introduced it in all their platforms and made the excitement of the innovation common place.

 

The Switching Barrier

Probably the most interesting of the lot is, why is the daily active users of Instagram Stories more than Snapchat? It is because of the reward mechanism. The main reason that people share pieces of their life on Social Media is to garner likes and comments and to take pride in that achievement. This was their return and that was not what Snapchat is offering. In the case of Instagram, the stories let them be whimsical without having to go through the cumbersome task of having to find all their friends on another medium and sharing the things that was shared elsewhere with the same set of people. Can’t see the same cat everywhere I turn – thanks very much. Going forward detailed media planning is necessary before posting a major life event, I’m sure.

 

The end of Snapchat?

I really cannot end this article without a word about the CEO’s alleged comment about India being poor. Fascinating to witness how a single piece of trending news could unleash so much stench. A billion people hating you? Not a place to be. Which only teaches a lesson in e-reputation management. All my Indian friends have already deleted the app. Non-Indian friends confess to using it lesser. We need to wait and watch if Snapchat has something good up its sleeve to save itself!

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