Oh Snap! Kylie Jenner knocks £1bn off Snap’s shares

Oh Snap! Kylie Jenner knocks £1bn off Snap’s shares

Olivia Crawford

A single tweet from Kylie Jenner wiped £1bn off Snap’s shares, leaving investors confused and concerned. Olivia Crawford takes a look at what it means for Snapchat and assesses the growing trend of celebrities influencing stock markets.


 

What Happened?

Recently, Kylie Jenner, the American reality TV star, social media personality and entrepreneur, tweeted: “sooo does anyone else not open Snapchat anymore? Or is it just me… ugh this is so sad”. When the stock markets opened the following day, Snap’s (Snapchat’s parent company) shares plummeted, once again reminding us of the impressive social media influence of the Kardashian/Jenner clan. The tweet wiped $1.3bn (£1bn) off Snap’s stock market value and share prices reduced to near the $17 price at which the shares were listed when the company floated on the stock market in March last year.

Why is it important?

It’s indicative of a growing trend where social media posts from high profile individuals possess enough influence to put an enormous dent in a business’ share price. For example, in 2016, Donald Trump sent Boeing share prices tumbling when he threatened to cancel the US Government’s order over Twitter. But this instance is particularly unique because Jenner supposedly wields very little political or market power. It highlights that, in an age of social media, PR is about more than just monitoring stock markets and begs the question – how prepared are companies for events like these?

It also raises questions over the future of Snapchat. Jenner is one of Snapchat’s most influential users and her tweet validates the wider dissatisfaction amongst Snapchat users. Indeed, the company is facing a breadth of other problems, and this latest development will not be welcomed by investors. To date, over one million people have signed a petition demanding that the company roll back a recent unpopular re-design, which led to Citi downgrading the company’s stocks. Once seen as a social media leader, Snapchat is facing increasing competition from Facebook and Instagram, who, following Snapchat’s success, have developed uncannily similar features, such as Instagram and Facebook stories. The company is struggling to keep pace, and investors are concerned.

What has the reaction been?

Reaction has been mixed. Initial surprise and confusion amongst investors and analysts has turned into in-depth and critical analysis of Snap and Snapchat’s future.

Many commentators are questioning what it means. Daniel Ives of GBH Insight believes “Snap is doing the right strategic moves but needs to manage this process well as celebrity influences like Kylie are a key ingredient in the company’s recipe for success”, whilst the BBC’s Technology Correspondent, Rory Cellan-Jones, has said, “the market just doesn’t know what to think of Snap or its Snapchat service. It is either the future of communication – or a social media fad that will last not much longer than one of the messages its army of young users sends”.

However, there is widespread agreement that recent events are inextricably linked to Snap’s recent poor performance. An analyst at Hargreaves Lansdown said, “Part of the problem is Snap isn’t profitable at the moment, so there’s a fair amount of hope for the future already baked into the share price, making it particularly vulnerable to swings in sentiment”. Other media outlets, including Vox, have questioned the extent to which Kylie Jenner was the cause of the declining share price. Vox argues that ‘Snapchat was floundering before the update’ given its decline in both profits and users. The Guardian gave a particularly critical analysis: ‘is Snapchat becoming irrelevant?’, arguing that this is ‘more than just a one-day PR snafu’.

Best Headline:

Kylie Jenner Just Taught Snapchat a $1.3 Billion Lesson (and It Only Took 1 Tweet) – Inc

What’s next:

In the short-term, Snap can be reassured by the fact that Kylie isn’t quitting Snapchat just yet, with the starlet recently posting a picture of her baby daughter on her account.

The long-term future of Snapchat remains less clear – their shares remain volatile and investors are sure to keep a close eye on the company’s performance. As highlighted above, part of the reason Kylie’s tweet has such an impact is because the markets don’t know what to make of Snap. Snapchat would benefit from improving their communications and key messaging with investors and stakeholders to build confidence in the markets.

Snapchat also needs to remain relevant and increasing user numbers will be essential to their survival. They should continue to embrace new features and broaden their appeal beyond the 18-34 audience, whilst listening to consumer feeling before a high-profile celebrity publicly ‘disses’ them. Snapchat recently rejected user complaints about its most recent re-design, with Snap CEO, Evan Spiegal saying users just need more time to get used to it but ensuring goodwill amongst its user base will build resilience and ensure the company can weather surprises like this.

An important lesson in a social media age is that reputations take years to build, but only one tweet from a Kardashian/Jenner to ruin.