Snapchat Discovers Cash Flow with the Balanced Scorecard

Feb 04, 2015

It’s the same old social social-media song-and-dance; how long can a platform survive without cash flow, while continuing to serve millions of users. It’s a plight once faced by Facebook, LinkedIn, Instagram, and the once-dominating Myspace. Who’s next on this list? Snapchat.

For those of you who don’t know what Snapchat is, it’s a photo and video messaging platform that started gaining traction among the millennial market in 2013. Like others before it, Snapchat is an ad-free app whose sole purpose is to gain the loyalty and drive full adoption among their user base.

So, what’s the big-deal? Why are we tipping our hats to a social media company?

Here’s why: Solid strategic plans are built based upon the balanced scorecard method. Without getting into too much nitty-gritty detail, a strategy based on the balanced scorecard is supported by four distinct perspectives:

  • Financial
  • Customer
  • Internal Processes
  • People/Learning

Many organizations design organizational strategy to drive near-term revenue growth. What’s fascinating about Snapchat is they deferred that goal to tackle other priorities first, most notably creating the internal processes and finding the people to build and support an application that handles an estimated 700+ million picture messages a day (and that estimate was in May of last year!)

Their processes and people allowed them to create an awesome, customer focused app that put a huge market share dent in the ultra-completive social media landscape. They’ve become a stable icon on the home screens of Z and Y-gen users all while using barebones private funding.

This week, Snapchat rolled out a massive system update named “Discover” that allows users to browse the profiles of featured accounts. The first round of featured accounts include CNN, Cosmopolitan, Vice, and Warner Music just to name a few. The idea is actually pretty brilliant because they get to sell ad space, which also provides engaging, value-added content for their users. It’s a win-win for both and a huge leap in Snapchat’s financial strategy.

When Snapchat passed up a 3 billion dollar cash offer from Facebook in 2013, many raised an eyebrow. Last summer, they were valued at 10 billion. Now, they’ll see the cash flow and sales growth they’ve been working so hard to achieve.

This is just another perfect example of how strategy isn’t always a linear process. You go, Snapchat.

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