
The Bull Case for Snapchat - xenophon
https://techcrunch.com/2017/02/17/the-bull-case-for-snapchat/
======
ditonal
After initial skepticism, I like Snapchat for reasons in the article (lower
pressure). And I think they "get" the younger generation and have good product
strategy, a lot like Facebook succeeded in a crowded space for similar reasons
with a similar amount of skeptics.

Problem to me is they seem more like Twitter than Facebook in that their only
real monetization path is ads, but their ads don't seem that valuable.

If I'm selling watches, I want to pay Google to advertise to people who just
searched for watches. If I'm selling retirement planning, I want to pay
Facebook to advertise to middle aged people who like personal finance topics.
But who wants to buy Snapchat ads? Some people who want to do brand awareness
marketing on a trendy platform but not much else. So I think just because they
can get lots of users does not guarantee success.

~~~
wahnfrieden
In Snapchat, people actually routinely engage with ads by spending time
setting up and taking photos using branded filters, then sharing that ad with
friends. That's starkly different from the typical loons you see replying to
an ad on Twitter.

~~~
jonknee
But the [multi billion dollar] question is do they then buy the stuff from the
sponsoring companies? Most advertising on Snapchat is experimental, we'll have
to stick around to see if the experiments are successful.

~~~
ReverseCold
Doesn't matter, it helps brand image/awareness, which indirectly affects
sales. They're already very successful.

~~~
omarchowdhury
If they want to justify $25 billion plus valuation they will need to open the
platform to be useful to businesses other than the high spending brand
advertisers, which is certainly a lucrative segment but not the totality of
advertisers. Once the people at Snapchat just accept that buying things is
also apart of the human experience, then they'll be able to build in direct
response ad formats and sales tracking (online and offline). Right now their
ad formats are on the level of vanity, though vanity does sell it doesn't sell
to all. In the long run, for Snapchat to justify $25bn and greater the local
Chinese restaurant needs to be able to send an ad with a call to action to
Snapchat users in a vicinity of their choosing, and also be able to track
conversion by who walked in. This is all technically feasible, and Snapchat
may open up to more sales conversion advertisers. But, that same Chinese
restaurant could be doing this advertising campaign today on Facebook and
Google. So what makes Snapchat special? They will need to train their users to
accept advertisements from unknown entities, because right now their ad
content leverages previous brand recognition and borders more on entertainment
than sales.

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sushisource
Snap to me smells too much like a company based around a particular fashion,
rather than a fashion company - if the analogy makes sense.

They do the one thing really well, but it's going to go out of style at some
point as these things tend to - and I'm not sure I believe they have enough
other projects going on to overcome that.

I could be wrong, for sure.

~~~
nemothekid
>They do the one thing really well, but it's going to go out of style at some
point as these things tend to

I sort of get your point, but this exact same thing has been said about
Facebook, Instagram & Twitter. To counter my own point, there's also MySpace,
Path, YikYak and Google+. However, I imagine that Snapchat has surpassed the
"terminal velocity" in user growth/size to a point where I don't think its
going anywhere anytime soon.

~~~
mjolk
Facebook asks for a lot of information from users and grew its way into
government contracts and safer high $value arrangements due to how much data
they store. Even if you're not "on" Facebook, people you know will establish a
presence for you in Facebook's data.

Twitter accounts are cheap and the platform only has value as long as
advertisements can run unchallenged by a large number of users.

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nodesocket
I'm sorry but the day I take financial news and advice from TechCrunch is the
day I've official gone looney tunes.

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brockvond
Snapchat makes money on premium accounts which are mostly amateur porn
accounts. Idk if that helps or hurts. edited to say: I don't know how much
money they make but they seem to have a pretty substantial direct-to-consumer
porn platform going on lol.

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tschellenbach
On the other hand they have zero user lock-in and are heavily losing money.
That's a risky combination.

~~~
argonaut
If they have zero user lock-in, then Instagram/Facebook have zero user lock-in
too.

~~~
eunoia
That would be the case if Instagram/Facebook's only source of lock-in was a
user's established friend connections. However, Instagram/Facebook also have
extensive history of each user's actions and content.

This is valuable, and why Facebook creates retrospectives for its users (in
the last year you posted X times... here's where you were 2 years ago... etc).
Snapchat lacks this due to the very ephemeral nature of the service.

Edit: grammar

~~~
josh2600
This is an asset for their users, not a liability.

If you were to try to compete with Snapchat on the basis of having history,
you would fail.

~~~
tqkxzugoaupvwqr
A product of similar nature to Snapchat (posts are deleted after n hours)
could quickly grab all Snapchat users if Snapchat fatigue sets in and the
other product looks new and shiny. All it takes for users is to download
another app.

~~~
Hasz
All it takes is for users to download the app _and convince all their friends
too._ That's the tricky part, and definitely the incumbent advantage.

I'm not sure x hours is enough of a pain point (if it is at all) to get people
to move.

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aetherson
This feels like a tone-deaf week to publish an article suggesting that
Snapchat will become a $100B company in 2020 by acquiring Magic Leap.

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paulpauper
The thing is, everyone says it's a 'fad' yet look at Twitter and Facebook--a
decade later and still going strong. There is something about web 2.0 that
makes it immune to the boom and bust cycle that beset web 1.0 companies (like
Myspace, Aol, Yahoo, etc). Everyone seems to be using it..and the mobile rich
media makes it ideal for advertisers, who pay a lot for those ads

~~~
sxg
Twitter still going strong? Check the latest news on that. What's interesting
about the tech scene and Snapchat right now is that there are a lot of popular
startups/apps, but only some are wildly successful while others are struggling
to make money. There isn't a 1:1 correlation between popularity or number of
users and profit.

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Grue3
Snapchat will be the next biggest bust since Theranos and Magic Leap.

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theincredulousk
Sorry, tuned out at $100 Billion. This is doing keg-stands of your own Kool-
Aid.

If you think Snapchat has the same macroeconomic value to the world as Intel,
Cisco, or McDonald's... Then you've lost the ability to evaluate a technology
business.

I'm not sure whether to accuse this of being shill or to systematically prove
how flaky the argument is. The fact is that it doesn't save photos is as much
lack of a feature as it is character. The users of this app know how to take a
screenshot... It's the ICQ of a different 3 years worth of teenagers that will
get stomped by the next messaging app that is different from the one other
people used for the past 3 years.

Snapchat is valuable because of demographics. Unfortunately those demographics
grow up quickly, and the ones that replace them will rebelliously reject what
preceded them just like teenagers have done for the last 50 years.

The fact that they are worth $18bn now is nothing but a prime example of the
times. Mind you I know the company I'm in. VCs invest based on their bet and
the reason that valuation sticks is more marketing than it is reality.

Snapchat just isn't that valuable to the world.

~~~
nikcub
> It's the ICQ of a different 3 years worth of teenagers

Snapchat is already 6 years old and my mum joined it last week to keep up with
all her friends and family.

That's the thing with the bear case, you're right 95% of the time because most
businesses fail but you never have to justify or be accountable for the 5% of
times you're wrong.

HN history is littered with pessimism about tech companies - Facebook isn't
worth $30 billion[1], Facebook isn't worth $50 billion[2], Facebook isn't
worth $100B[3], Uber isn't worth $10 billion[4].. Snapchat isn't worth ..
repeat. rinse.

[1]
[https://news.ycombinator.com/item?id=1719975](https://news.ycombinator.com/item?id=1719975)

[2]
[https://news.ycombinator.com/item?id=2062145](https://news.ycombinator.com/item?id=2062145)

[3]
[https://news.ycombinator.com/item?id=4002857](https://news.ycombinator.com/item?id=4002857)

[4]
[https://news.ycombinator.com/item?id=7911560](https://news.ycombinator.com/item?id=7911560)

~~~
theincredulousk
Personally I'm not a chronic pessimist, but my view on Snapchat is the same as
Twitter, and look at what is happening with them.

They are only worth their Market Cap in the sense that investors literally
bought-in that much because of a hypothetical upside based on scale. What
happened when they tried to sell the company? The realization sets in that the
company just isn't worth that much money, nor can anyone foresee how it could
be in the near future.

It is a self-sustaining situation with these companies. Nobody wants to write
off that big of a loss, so the valuation is sustained.

Many others are sustained on the inflated belief that the market for Ad views
is adjusted for the prevelance of fraud. How many times has it been shown that
click, view and user bots are used in staggering numbers. The companies making
all the money have little incentive to correct this. But of course Ads clearly
work in many situations. I'm just saying these bloated valuations based on ad
revenue have not been adjusted for the fraud reckoning. Google struck gold
because the underlying utility of the search engine is so unquestionably
powerful and ubiquitously necessary to the idea of the internet that it
guarantees a truly awe-inspiring user base. The value proposition of getting
that service for free makes viewing Ads a second thought - it is a reasonable
deal for the user.

What do people _need_ from Snapchat that will keep them there? Sharing
pictures and text messages is rapidly, and I mean rapidly, approaching a
commodity service on par with landline telephones.

Anyways, the blanket optimists are subject to the same odds. If you believe
everything is going to succeed, inevitably you will be correct. Everyone has
confirmation bias.

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aub3bhat
Snap has nothing to do with Augmented Reality. HoloLens is AR, Google Glass
could have been AR but were too underpowered. Snap Spectacles are nothing more
than passing fad.

