Earlier this month, two very different events caught my attention. The New York City Marathon was held on Sunday, November 5. And on Tuesday, November 7, Snap Inc. released its Q3 results.
Running with Strava
Like other runners, I spend the first weekend of November following the New York City Marathon. And though running is a popular activity on its own, runners are not known for their titillating conversation.
For non-runners, running talk is yawn-inducing. Training and racing are niche conversations. The social media start-up called Strava has honed in on those conversations and is making a business out of it.
Strava bills itself as the social network for athletes. Runners, cyclists, and fitness junkies join the site and post details of their workouts. Generally, these posts are auto uploaded via wearable fitness hardware from companies such as Fitbit, Garmin, and Apple. Users can add photos and captions to their workouts.
And like other social networks, friends comment on these workouts and give “kudos” (the Strava equivalent of Facebook “likes”). And thus, these yawn-inducing training updates become content for other athletes.
Strava is a niche company growing a niche audience.
Snapchat hasn’t had a great November. The company posted very disappointing results early in November.
How bad was it? “Wall Street demolishes Snap in a brutal round of notes this morning,” read CNBC’s headline.
“Snap Inc. looking to transform after disappointing Q3 results,” read another.
According to the analysts, growth is too slow, audiences are too small, and the company is directly in the crosshairs of Facebook and Instagram.
Snap shares initially fell more than 15%.
A tale of two social strategies
Strava makes money by selling premium subscriptions. For a monthly fee of about US$10, users have access to specialised content. Subscribers to The Wall Street Journal know the model well.
In short, Strava places “premium” workout information behind the paywall. Free content (i.e. user-generated workouts) is available to all users. The company does not sell advertising.
Snap, on the other hand, is a free service that seeks massive audiences and the corresponding ad sales. Snap has earned more than half a billion dollars in revenue through the end of Q3. (In comparison, Facebook had more than US$27 billion in sales over that same period.)
Strava is a private company and discloses very little, so specific information is hard to come by. According to its CEO James Quarles (who, not surprisingly, happens to be a runner and a swimmer), Strava has “tens of millions” of users.
On the other hand, Snapchat officially stated it had 178 million daily active users in Q3 2017. This is up only 3% from the previous quarter, leading to some of Wall Street’s disappointment.
To date, Strava has raised about US$70 million in capital. Snap had its IPO in early 2017 and was valued at nearly US$24 billion. Presently the company has a market cap of about US$15 billion.
Snap loses money and Strava probably does, too. Both are in California.
Which of these two companies will be around in five years? In 10 years?
It’s a bit like reading tea leaves. Snap is bigger than Strava by practically every measure. But strategically, they have very different visions of the future.
Personally, my bet is on the niche network subscription model. Then again, I’m biased. I posted my run from earlier today onto Strava.