Kylie Jenner’s tweet on Snapchat update costs company $1.5 billion

Jenner questioned the platform’s new unpopular update. (Reuters)

What’s the value of celebrity? It’s not just a theoretical question. Reality-star-model-cosmetic-maker Kylie Jenner wiped more than $1.5 billion from Snap’s wobbly market capitalization on Thursday after she questioned the usefulness of its main product, disappearing-message app Snapchat. Influential fans can attract users, and repel them if they publicly flee.

Balance sheets don’t capture that kind of asset, but maybe they should.

Celebrities such as Jenner, the half-sister of Kim Kardashian, provide a hook for audiences to follow. And for companies like Snap or Twitter, snaring users is – like – everything. Last quarter, Snap shares soared after it announced that more people were using the app than expected. Unsurprisingly, when Jenner passive-aggressively asked “does anyone else not open Snapchat anymore?”, the shares sank 7 percent.

Roundly criticized

Jenner’s shade-throwing comes at a delicate time for Snap. A roundly criticized redesign of Snapchat’s interface already prompted more than 1 million people to petition for change. In that sense, her lack of interest could be a leading indicator of user behavior.

There’s a bigger problem, though. Traditional accounting already struggles with tech companies. Aside from familiar debates like how to account for stock-based pay, balance sheets don’t capture innovation, or the indispensability of social networks, or the fuzzy glow of being part of a zeitgeist.

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Celebrity users definitely create value, or destroy it, as Jenner just did at Snap, but their potential influence doesn’t appear in a company’s accounts. In fairness, Snap already warns investors in its filings that endorsements from stars and politicians are crucial. Twitter investors would no doubt agree that the online musings of President Donald Trump are a positive for the company’s value.

Perhaps, then, they ought to be included as an intangible asset, to be written down when the celebrity stops being a customer – or stops being a celebrity. Kylie Jenner is no accountant – but she could teach the bean counters a thing or two.

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Last Update: Wednesday, 20 May 2020 KSA 09:51 - GMT 06:51
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