This big cut is a step in the right direction as it could attract more advertisers, but it’s not clear whether the price cut is sufficient. A $100,000 ad — one that disappears, mind you — is still a lot to pay for placement, even on a social network that’s highly coveted by millennials.
Some wonder whether the price drop is enough to make Snapchat an attractive advertising platform. Take the company’s worth, for starters: Snapchat has a $16 billion valuation, though it doesn’t yet earn regular income. Unsurprisingly, this has some on Wall Street concerned, with one of the biggest funds recently showing a public sign of skepticism when it comes to Snapchat’s ability to deliver.
Fidelity, the only fund to have invested in Snapchat so far, marked down its share in the company this past September by 25 percent. In June of this year, Fidelity had valued each share of Snapchat at $30.72, yet decreased the valuation to just $22.91 by September. A move like this symbolizes the concerns that investors have over young and popular tech companies like Snapchat, which so far have a lot of users, but disappointingly little when it comes to actual profit numbers. However, one could argue that Facebook had similar issues during its early days.
Time will tell if Snapchat’s valuation will ever be justifiable in the eyes of investors. In the meantime, the company’s striving to turn things around by luring more advertisers in its ultimate goal of reaching profitability. While $100,000 may still seem a bit expensive to some, there’s no denying that many millennials on Snapchat will see a company’s ad if you can pony up that amount of cash.
