
Snapchat is Intrinsically Worthless - roymurdock
http://roymurdock.com/essays/2013/11/snapchat-is-intrinsically-worthless/
======
ChuckMcM
I loved this piece, but perhaps not for the reason Roy wrote it.

One of the common themes in investing is "what am I missing?" and this piece
is a great walk through through a reasoned set of parameters that might make a
company or project more or less valuable. The assertion that SnapChat is
'Intrinsicially' worthless is of course false. For something to actually be
"worthless" in a free market would require that either no one would offer any
value in exchange for partial ownership, or there would have to be outright
fraud. We say a 'fake' Van Gough is worthless because it is worth much less
than an original, but someone might buy it because they like the painting and
they can't afford an original. As a painting it would probably be worth more
than a print. But not actually "worthless."

So what is he saying? He says that Snapchat's recent valuation was much higher
than he would have put it. And we can ascertain that like the forgery vs.
actual painting the difference in the two numbers is large.

So what is the basis for this disconnect? It is this:

 _" $4bn for an easily replaceable service that is little more than Microsoft
Paint duct taped to a disposable camera? A service that voluntarily throws
away its own data in the golden age of data hoarding? A service devoid of the
nature of competition that is the driving behind every other profitable
company in the world?"_

The focus here is on the tech and not the market. A pet rock was 'worthless'
(the rock was just a rock) but the connection with a generation was valuable.
So often in our business we look at something that we feel like we could build
(or could be easily built) and a valuation, and focus on those two things. The
parts we don't see we give little value to (350M snaps? Seriously? That is a
boat load of engagement). Making anything that get 350M 13-23 yr olds engaged
is a pretty huge deal. _That_ is what is valuable with Snapchat, not the tech.

~~~
tomphoolery
Agreed. This is why Snapchat is attractive, and the model of "get users and
content now, monetize later" _has_ worked in the past. So this is simply a
scaled-up challenge. I'm curious to see how Snapchat makes its money.

Here's some of my ideas and they all involve in-app purchases:

* Corporate deals that allow you to place products in your snaps, kinda like Photoshop. Example: you pay $0.99 to be able to place a character from South Park in your Snap.

* High-quality snaps, that take advantage of your camera's full resolution

* Sound snaps, so you can record 30 seconds of audio and send it to a friend. Great for sharing tracks you make or music you're hearing, or just to record some idiot yelling on the bus.

There are many more possibilities. Snapchat can almost be thought of as a
"social game", a sort-of cross between FarmVille, Instagram and Twitter. You
can still share basic things to your friends, but you can pay to send even
better things. My ideas may or may not be shitty, but they still prove that
the service probably can monetize, in my opinion.

~~~
dinkumthinkum
This is, to me, like an advertisement for the Amish lifestyle.

------
cylinder
Imagine a beach. People come to the beach, play, build sand castles they later
destroy. It's one beach on a long stretch of coastline. But this particular
beach is incredibly popular, where lots of young people go to hang out with
each other.

How much would you pay to own that beach? How would you justify that
investment -- would you plan to charge an admission fee? Would you wrap the
beach in ads and sponsors? Would you charge to build sandcastles? Would you
sell concessions?

I think it's helpful to think of SnapChat and many other businesses with this
metaphor.

~~~
dakrisht
Yeah, and then all of the sudden it starts raining and the kids flock to
another beach with a newer DJ and fresh faces.

End game.

~~~
cheeyoonlee
I believe FB Poke tried to make it rain but look how that turned out

~~~
billmalarky
To be fair though, snapchat isn't old enough to be "lame" while facebook is,
and snapchat isn't doing anything to piss off users yet (which they will have
to in order to monetize most likely).

We'll see if snapchat can hold the throne after serious monetization.

------
cromwellian
I thought I was taking crazy pills when Zynga got valued more than Electronic
Arts. Yeah, a company with games that practically aren't even games which
makes money via spammy offers, is worth more than a multi-decade-old company
with a gigantic catalog of games, which people actually pay cash for, spread
out over every continent and every console, handheld, and PC. When I saw that
story, I was like "do any of the journalists on the story actually stop and
think for a second?"

~~~
dpcheng2003
It turns out smart people do dumb things all the time. The trick isn't being
smart all the time, which is difficult.

Rather, you want to be smart at the right time and convince other incredibly
smart people to do something incredibly dumb in that fleeting moment.

Last I checked, most of us have never created a messaging app that grew to
350M messages in two years. More importantly, most of us didn't also then
convince smart investors to let us cash out at some ridiculous valuation.

Props to the Snapchat guys and I hope they figure out monetization but at the
end of the day, they got their FU money and built something huge. That's a win
in my book.

~~~
dakrisht
Yes, yes they do.

But like you said, that's fine.

Props to the SnapChat guys for cashing out, raising a ton of venture from
sheep VCs and getting millions of users? YES, absolutely.

Props to the SnapChat guys for creating something of value, substance,
technology, IP, etc. None, zero. Just another BS app riding the wave of the
top-10 in the appstore.

It's not a WIN for society when you create garbage that has some sort of value
to it. It's just more clutter. But maybe it doesn't matter, people need
entertainment, people need dick picks, bad Hollywood movies, Miley Cyrus -
these are all business commodities. And if you're capable of that vs. nothing
else, good for you.

“You only have to do a very few things right in your life so long as you don't
do too many things wrong.” Warren Buffett

~~~
knieveltech
"Props to the SnapChat guys for cashing out, raising a ton of venture from
sheep VCs..."

Is this what our industry has come to? Congratulations for raking gullible
investors? Like, that's not only socially acceptable, but a worthy outcome
that should be applauded?

~~~
taude
Probably a lot of people's goals around here? Whether they're going to state
it so bluntly or not.

~~~
knieveltech
Evidence that if you pile enough money up in one place the sociopaths will
rush in like someone pulled a drain plug.

------
gaius
I don't know if you know much about Victorian farming techniques, but it was
around then that bat guano was discovered to be an excellent fertilizer. This
started what amounted to a gold rush, as people set off to make their fortunes
from harvesting it. That is the origin of the modern term "batshit crazy".

I just mention this apropos of nothing.

~~~
morsch
Not really: [http://english.stackexchange.com/questions/38354/where-
did-t...](http://english.stackexchange.com/questions/38354/where-did-the-
phrase-batsht-crazy-come-from)

~~~
gaius
I think you may be missing the point I am making. See other recent threads
about bubbles.

------
polemic
Perhaps their endgame is to use a vast collection of compromising images
collected under the pretence of privacy to extort protection fees from their
users.

~~~
tedunangst
Slight possibility of a lawsuit there.

~~~
quantumpotato_
Unless the extorter was a "third party" "hacker"

------
itsprofitbaron
_$4bn for an easily replaceable service that is little more than Microsoft
Paint duct taped to a disposable camera?_

Oh please!

Sure you can recreate the app pretty easily which, you can also do for most
services (this does not mean scaling to the users they serve) _but_ that is
not the value of the service.

It's also why 'hackers' typically don't make great investors see:
[https://news.ycombinator.com/item?id=8863](https://news.ycombinator.com/item?id=8863)

~~~
roymurdock
Haha you caught me. Had to poke a little fun at Snapchat after a long day of
writing about such a simple little service :)

Snapchat is firmly entrenched in its spot due to its first-to-move position
(see Facebook's failed "Poke" project) but the point is that if it tries to
change the service in an annoying manner then there is nothing to stop people
from moving to an identical (or better) service that does not annoy them.

------
minimax
Irrespective of present revenue, the acquisition value of Snapchat to
Facebook, Google, Yahoo and co basically puts a floor on the valuation. E.g.
if I am an investor and I think Google would pay $5B for Snapchat, it makes
sense to buy it at $4B. So I guess the trick is not to figure out how much
revenue Snapchat will generate on its own, but rather how additional revenue
Google could generate if it owned Snapchat (which will drive the acquisition
price).

~~~
roymurdock
I address this in the article: Snapchat doesn't want to be acquired because it
thinks its creating its own new market where it has 100% market share.

I agree with you that Snapchat is intrinsically worthless, hence the title of
the article.

Even if it was eventually acquired, how could the service be augmented to
funnel users into a parent company (Google, Facebook) when the very nature of
the application is to create media, then delete it. This builds no links or
references to outside sources, no galleries of images, no way to generate ad
revenue.

~~~
minimax
Every small, well-funded tech company ever has claimed that they weren't
interested in acquisition. I certainly don't think that will keep the M&A
folks at the big tech companies from chatting up Snapchat's investors.

For the second part, Google makes billions figuring out how to get ads in
front of its users. I'm sure they'd be able to do something for Snapchat.

~~~
roymurdock
I agree. If anyone can figure out how to monetize this mess, it's Google.

Or maybe the return on the $4bn investment isn't worth the brain and manpower
necessary to wrestle the app into some kind of monetization scheme?

~~~
minimax
One other thing to consider: Google is sitting on something like $56B (and
growing) in cash and short term investments. They could set $4B on fire and it
really wouldn't alter their balance sheet significantly. Given its big push
into "social" over the past couple of years, I could make the case that it's
worth spending some of its cash to try and acquire a bunch of (admittedly
fickle) users.

------
clienthunter
Your Cart:

* 350m snaps per day + potential growth \- At least 3 interaction screens per snap (pre-view/view/post-view): that's over 1bn places you could put, say, ads _per day_. Do the CPI/conversion math on that. * User data for 200m+ users + the ability to extend and refine * A direct line to 200m+ home screens via push notifications * Enough inertia to mitigate the threat of competition ( _Facebook_ challenged with the Poke app, that failed) * The potential to change/extend the feature set to more revenue oriented streams * All other possible things you could do with an enormous and massively engaged captive audience...e.g. walking past Starbucks - they're having a slow day. Receive Snapchat from Starbucks with scannable special offer code and super quick expiry. We've just made Groupon for the high street. * Rights to all the above until the end of time

Total: $4bn

Doesn't seem so crazy to me.

------
edoardo
I published an article about Snapchat a couple of days ago. Yes, it is.
Snapchat is not a "sustainable business", it's a trend or a bubble. People are
using it now, because it's cool; but in a couple of years, there will be
another trend and so on. Even if they are still alive after 5 years, the
valuation is ridiculous. Entrepreneurship is not about money, but at some
point you need to face this problem and have a solution in your pocket. They
are worth $4B and they don't have a clue. I guess this is just another
groupon. ([http://greatpreneurs.com/startups-dilemma-trends-
businesses/](http://greatpreneurs.com/startups-dilemma-trends-businesses/))

~~~
dakrisht
Totally.

It's how the wind blows these days in "tech". It's reminiscent of a bubble
with all of these mobile apps calling themselves "companies" when most aren't
even profitable. It reminds of the early 2000s when "how many eyeballs do you
get monthly" was the question of the day.

Does Pinterest really need $400M+ in venture to operate? What are they doing
over there? Advanced robotics with neural implants? Burn rate of $30M a month?

Utter bullshit.

Like I said before, VC's aren't dumb but they're also not very smart, most at
least - they don't need to be. They flock to whatever's hot and popular
(trendy) and invest. Their exit strategy is simple: a highly overvalued IPO
where the public market will buy based on hype or an acquisition.

These unsustainable trends in extremely overvalued companies/apps will
continue for a while, unfortunately.

Until the shit hits the fan and one of these giants of venture capital
infusion tank.

Unfortunately, it's so much more than an issue of Snapchat being worthless,
it's a large chunk of the tech community today being generally worthless by
looking for the EASY WAY OUT - building some stupid app, getting 5M+ users for
a few years of engagement and raising large rounds and cashing out. There's no
intrinsic value of any kind in this.

It wasn't like this before the App Store.

There is still great technology being developed out there, but most people
(and human nature in general) flocks to the easy way out, the replication
factor, globalization, the art of copying something, or as Peter Thiel would
say" "the 1 to n of globalization."

~~~
nemothekid
I'm unsure why you chose to pick on Pinterest. It seems to have a very real
business model that is powered by very real and powerful engagement metrics.
Pinterest could very well be as solid as facebook.

Why does Pinterest need $400M in venture to operate? Lets ask ourselves why a
glorified status feed, Twitter, needs over 100 engineers. Why does Twitter
need to rewrite almost every aspect of real-time stream processing? Because
there is huge value there, and at that scale I'm sure the financials look a
lot different from your weekend web app.

Back to snapchat, this tech doomsday bubble, everyone is parrotting is a
single lone horse in what are many successful and sustainable companies such
as DropBox, Uber, RocketFuel and Square. And its not like snapchat is an
imaginary app. Snapchat shares over 350M photos a day, people aren't lining up
and seeing snapchat success overnight.

I'm having trouble seeing that the current tech industry is in a "bubble" when
the only evidence for it is that SnapChat, with an incredibly huge userbase,
is raising ~3B. For whatever reason the other 39 "unicorn" companies don't
count.

~~~
dakrisht
Maybe because they're unprofitable? Maybe because what's the point of pinning
random items on a virtual pin board? Maybe because what's the need for $500M
in capital for a website? Maybe because what good does Pinterest do for anyone
or anything aside from waste time?

In Twitter's defense, while they might not "need" 100 engineers to rewrite
their code, they are certainly infinitely more than just a glorified status
feed.

Twitter has allowed millions of people across the globe to share insight into
what is happening in their back yard. While for us Americans, this might
include the dog taking a shit on a Macbook, in the Middle East it's far
different. Twitter and FB have been responsible for a lot of insight and
uprisings, especially during the Arab Spring.

Additionally, Twitter is an innovation in communications. Just like Skype is,
but perhaps less so or just differently. Marc Andreessen said it perfectly:
"Twitter is instant global public messaging - for free." That has some value
vs. pinning my dress on a pin board.

Point is - SnapChat is worthless, Pinterest is less worthless but still has
little value. Sure, advertisers and brands flock to the net since their old-
school TV/print models are being replaced by technology - but very few "apps"
are companies/businesses. And young users, particularly teens are very prone
to jump ship like fleas off a dog when the "latest and greatest" comes about.
Do you see SnapChat existing in 10 years? I don't think so. Pinterest? There
will be something newer. FB? Twitter? Dropbox? Yeap, they'll still be around.
And probably doing better than ever.

------
richardv
Am I missing something but I always assumed that valuations at this stage of a
company is to do with huge/vast sums of money being removed from the table by
the founders and they've done this by selling a good stake of their
equity/voting rights in their company.

The founders are now rich.. but the company isn't.. and if they raise a next
round, their true valuation will shine through...

~~~
harryh
Anytime stock changes hands in exchange for money it's reasonable to use that
transaction to value the company. It doesn't matter if it's the company
selling a piece of itself or employees selling stock to an investor. Someone
is still paying money for ownership.

If anything, employees selling shares probably makes it easier because it's
common instead of preferred shares being sold.

------
babakian
What Snapchat has is millions of users who have formed the habit of opening
the app every day and using it to communicate, sending 350 million* snaps a
day. You can go ahead and make clones of Snapchat (or Facebook or Twitter),
but building a clone does not guarantee that you will get the number users
that Snapchat (or Facebook or Twitter) have. The investors are betting that
the folks at Snapchat will experiment to find ways to extract money from some
small subset of Snapchat's users (e.g. let's say Snapchat has 350 million
users and they find a way to extract $10 a year from 1% of their users, then
that's $35 million a year). This is the bet that the investors of Snapchat are
making. It's a risky bet, but they're OK with that. They're used to making
risky bets. Most of their bets don't pan out, but the ones that do...well,
you're smart, you get the picture.

* This number was taken from the article.

[Edited to fix typos.]

~~~
Guest98130
That's a steal. Buying at 4bn and earning 35m a year, it'll be paid off in a
short 114 years. After then, it'll be smooth sailing.

~~~
babakian
Ha! I should have used larger made up numbers! How about $100/yr from 5% of
their users? Anyhow, you know that the investors are betting that the numbers
will grow.

My main point is, Snapchat has a lot of users who have formed the habit of
opening the app and sending snaps, totaling hundreds of millions of snaps/day.
Simply cloning the app in no way means that you can generate those kinds of
numbers. The numbers are stellar, and the investors seem to think so as well.

------
thesash
Can someone who understands the strategy behind fundraising explain why they
would want to raise at such a high valuation? To be clear, one point left out
of the article is that the $3.5B - $4B valuation is a rumored valuation being
"considered" by the startup (Their most recent round of funding valued them at
$800MM). When I read about the "rumor" my immediate thought was: Snapchat
leaked that to the press to gauge the response from potential investors /
acquirers. The thing I don't understand is: what is their goal here? It seems
like raising at a 3B+ valuation limits their options for an exit to either an
IPO or an acquisition by one of maybe 3 companies. Raising at such a crazy
valuation also seems extremely risky considering the volatility of apps in
their space and the fact that they haven't even begun to explore monetization.
What am I missing?

------
gcatalfamo
If somebody would be looking for "bubbles", Snapchat at 4B is a clear sign of
one.

~~~
dakrisht
Please be sure to include Pinterest in this one.

They might be valued higher than Genentech at this point.

------
johnrob
I'll suggest a simpler framework for valuing Snapchat: probability of becoming
another Facebook. If you think it has a 5% chance, then it should be valued at
around 5 billion (relative to Facebook's 100 billion).

~~~
TrainedMonkey
I think there is literally 0 chance for another Facebook. Google tried with
Google+ - billions of dollars, millions of man hours by brilliant engineers,
crazy bundling strategies by Google. Is Google+ another Facebook yet? Nope,
not yet, maybe not ever.

Your strategy has merit, but simply making another Facebook is not going to
work now (It would have back in Myspace days). Now there is not an untapped
market of people - almost everyone has things vested in social media
companies. 1\. Companies need either to do better then Facebook (Once again
Google tried. Do not get me wrong, there is a fair chance that eventually
Google+ will prevail, but very few projects have full might of Google paving
their success.) 2. Or have different punchline than Facebook does to attract
users (This is what Snapchat did). *typoed

~~~
georgemcbay
I agree. For better or for worse Facebook is the World of Warcraft of general
purpose social networks, anything trying to go head to head with it will lose.

It'll probably die off eventually but what replaces it will probably look
nothing like it and will exist in a much different climate.

~~~
wrongc0ntinent
I'm betting on Orkut.

------
ojbyrne
I think its important to point out that tech blogs always want a breathlessly
huge top line number, and that investors play along (The same thing seems to
happen with sports contracts). But the details are often vastly more complex
and full of earnouts, triggers, board seats, etc, etc. And according to the
allthingsd article linked to, the deal hasn't been closed yet:

"Sources said the round being raised — up to $200 million — will come in part
from China’s Internet giant Tencent and value the self-destructing mobile
messaging startup from $3.6 billion to $4 billion."

------
FailMore
I think Snapchat are crazy if they don't put ads in there soon.

I see Snapchat as a faster Youtube. It's basically content that you want to
see - Youtube from the masses, Snapchat from your friends.

The Youtube advertising model is clearly fantastic. From things I've read some
time in the past I know they kill it on a $/user basis vs pretty much every
social site on the web.

Putting a 2 second static 'brand flash' in front of every snap would probably
not put people off using the service (in the same way that people still use
Youtube - even though video hosting is a highly replicable thing). And from a
brands point of view 2 seconds is probably all you need to get into someone's
subconscious.

Bonuses for being an app:

1) Full screen take over. 2) No distractions from other tabs. 3) I'm sure they
could find out age and sex quite easily if they wanted to. So they would have
- age, sex and location. POWERFUL.

The sooner the better. Explain that the app needs to make money to it's users.
People get used to things.

~~~
205guy
I think you're onto something. Just imagine if the _sender_ gets to pick the
snap sponsor from a list of 5-10! Double-monetization.

I disagree with the "snapchat is worthless" analysis of the original article.
Perhaps from the point of view of the current monetization needs and
mechanisms, but my feeling is that snapchat's "ephemeral" model, like it's
users, is a young and fresh approach. They will invent something new. Of
course, they may also die out like so many others, but it's pointless to say
the indusrty shouldn't be that way. The developers may aspire to greater
goals, but the consumers still dictate what they want.

------
ramirez60
The comment about stickers makes me think you don't understand how much money
they make and how much people use them. It's massive. Look at Line made 17
million from stickers in Q1 this year, Kakao made 311 million in revenue and
I'm not sure the breakdown but stickers is significant enough that it's
mentioned in with gaming as the main source of revenue.

Stickers, whether it's reasonable or not, are a great way to monetize on
messaging.

Snapchat also allows you to find someone to talk to that no other service does
as seamlessly. From my understanding anyway, people will send out snaps to a
group of people, many time everyone they're connected to and after a few snaps
back and forth with one or two of the responders, they'll switch to another
channel and chat. One could argue adding messaging here would increase the
stickiness, but I think snapchat is right in that adding it in would just be
distracting.

~~~
amplification
I think if your main source of income is stickers, that's risky. They will
(and already are) become commoditized - with MessageMe, Path, etc... all
jumping onboard.

I'm guessing that stickers (siloed in each app) are a fad that will eventually
go away.

------
Apocryphon
Competition could be a good way, once you figure out how to gameify self-
destructing photos. Some sort of scavenger hunt model, perhaps? Giving out
clues? Maybe adding a Snapchat Games section for companies to host these
treasure hunt promotions? Or some sort of art contest?

------
namenotrequired
I'm particularly surprised about seeing Snapchat with twice the valuation of
Whatsapp. Here in Amsterdam, Whatsapp seems to have close to 100% market
penetration (i.e. almost all smartphone users use whatsapp), yet I've never
heard anyone about snapchat here.

~~~
205guy
This too is the future: no apps will be global, but multiple fairly similar
apps will carve out geographic niches, some larger than others. I can't really
say which app should be valued more, but I would tend to think the one with
the American teen audience will have more monetization opportunities (more
disposable income and less discernment--or susceptibility to adverts).

------
joyeuse6701
As you correctly analyzed, snapchats value is majority in user-base. I believe
it is specifically the attention of users that gives it value. We measure that
with metrics like reach, views, clicks, messages sent etc. The attention comes
from the novelty of it, as you adequately put, it has a low barrier to entry
due to it's 'low pressure'. It must maintain that attention through low
pressure to maintain value.

FB went the ad route a la google and then moved towards analytics. Twitter is
doing the same. If snapchat went down that route they would have to analyze
the photos taken, pictures drawn etc. to provide data to customers in the same
way.

Not to get too meta, but there is always value in self-expression.

~~~
roymurdock
Value for the user and the audience, not so much for the medium of expression.
Excuse the lame metaphor, but the canvas Van Gogh painted Starry Night on
can't exactly sell itself ;)

------
brianchu
Since a lot of people have trouble imagining why Snapchat is popular, I wrote
a blog post on it a while ago: [http://www.brianchu.com/blog/2013/09/11/photo-
embarrassment/](http://www.brianchu.com/blog/2013/09/11/photo-embarrassment/).

One thing that bears noting is that Snapchat is closer to mobile messaging
apps like WhatsApp than it is to photo sharing / social networking apps like
Instagram or Facebook.

------
bthornbury
A 3.5bn valuation does seem insane for a service like snapchat without any
source of revenue. I did read the other day about their extraordinary growth
of sent messages however, (up to 350 million a day!)and perhaps it is simply a
premium for said growth.

Regardless, I feel that the ephemeral nature of snapchat is likely to reduce
long-term user retention. You have no tangible investment into the platform
because everything is deleted.

------
Segmentation
With WebRTC, can someone make a ephemeral peer-to-peer, one-to-one or one-to-
many messenger?

I think that would be more private. Sever the 3rd party.

~~~
eli
I'm not sure most people would grasp the difference between a company that
says it doesn't keep your data and a company that says it can't keep your
data.

~~~
Segmentation
Probably not, but it could still be useful for privacy minded individuals.
Especially if it was open sourced on GitHub.

~~~
vidarh
Part of the problem here is that the privacy users care about here is not from
a third party, but from whomever the recipient might otherwise choose to share
the content with.

And that pretty much _requires_ a party other than the recipient whose
interest it is to lock down the client as much as possible to at least
increase the hassle-factor in violating the senders trust.

Otherwise, if the recipient had the "EvilReplicatingToFacebook" fork of the
app readily available, it'd quickly destroy any value in the app.

------
samsolomon
I think Om Malik said it best "...when you have revenues, you can't get people
into giving you mega valuations."
[https://twitter.com/om/status/394698596320169984](https://twitter.com/om/status/394698596320169984)

------
tonylemesmer
Is it because the more people jump on the more valuable it becomes and I just
sell my stock and I've just made a whole bunch of money?

------
g8oz
Their present valuation is a glitch in the Matrix. Enough of them and you will
realize the existence of said Matrix.

------
bluedino
Is Yelp honestly with TWO BILLION? What about Uber?

~~~
dakrisht
Yelp, no way in hell. Uber, closer for sure. Uber is a valuable service at
least in the Top-20 cities.

------
notduncansmith
While I agree with most of the points the author makes in this article, I
disagree with the ultimate thesis.

Snapchat offers what? __Engagement __

So how do you monetize that? __Get users to engage with brands __

Allow me to elaborate. Twitter 's Amplify partnership program is a brilliant
example of the amount brands are willing to pay to engage with customers (both
existing and potential). Twitter used to be in a unique position to offer that
engagement too: with huge penetration, easy integration into existing media
(putting a hashtag in the corner of a TV broadcast, for instance), and an
incredibly low-friction engagement process. Twitter made it easy for a brand
to create a sea of voices engaging with a brand. I believe Snapchat is now in
a position to make a similar offer.

Before I go on, I'd like to pose a question: how many people read event-
centric tweets after an event? Aside from journalists reporting on said event
looking for memorable tweets, my guess is not many. Hell, most people barely
pay attention to the stream during these events. At most, you have a tweet
that's at the top of a feed for a few seconds before being quickly pushed down
by a dozen more, __never to be read again __. I 'm sure by now you're
connecting the dots: Snapchat offers a similar service in that respect.

The thing is, there's a major core difference between these two. Twitter is a
public forum, and Snapchat is strictly peer-to-peer communication. This gives
Snapchat a unique offering, in that it allows brands to communicate one-on-one
with customers.

Imagine, if you will, a broadcast of The Walking Dead (I use them as an
example for two reasons: 1.) I'm a huge fan, and 2.) They're big on the
second-screen experience so this seems plausible). As part of your second-
screen experience, one might find a stream of picture responses to various
moments in the episode. Major character dies, suddenly the stream is full of
shocked faces (maybe some rage faces or big goofy grins, depending on who).
Now imagine this stream is powered by Snapchat.

This is already possible with Twitter, to a degree, but with Snapchat there's
less inhibition which will drive greater participation and greater engagement.
Not only that, but Snapchat would also allow TWD to engage back with the user
on a personal level- maybe respond with a snap that contains a marketing call-
to-action ("Want more scares? Check out the exclusive behind-the-scenes
footage online"), or just responds with a zombified version of the image you
sent in (how cool would that be?).

I'm sure there are many more awesome use cases than what I just stated, but I
think this example speaks to the fact that Snapchat can be a real force for
engagement without requiring brands to spam the hell out of the platform's
users. This is where Snapchat outperforms against any other social product
when it comes to driving brand engagement: because the users are so
fanatically engaging with the product already, __brands don 't need to spam
__. They can just interact with the users in a meaningful or entertaining way
- and I don 't mean this "Get a coupon that you have 10 seconds to screenshot"
bullshit, or "Let brands send snapchats that last forever" or any shit like
that. Just give the users a fun way to interact with your brand, and the
loyalty (and purchases) will come.

So, here's what I would do, if I were to monetize Snapchat:

\- $20/yr developer program

\- Free API access for up to 2,000 snaps sent/received per month

\- Pay-as-you-go model: $XX for every additional 10,000 additional snaps

\- Hashtag support (maybe)

\- Analytics

\- Offer consulting at a premium to help brands effectively leverage Snapchat

Notice the generous pricing structure. I think one thing that Snapchat can
cash in on is the uniqueness of its platform, and the eagerness of the hacker
community at large to build on top of it. I want you to recall the modest
success of App.net, which doesn't have nearly the engagement metrics or
penetration that Snapchat currently enjoys. I for one have several small
projects I'd like to build on the Snapchat platform, and would be more than
happy to pay a modest premium for the opportunity. The pay-as-you-go structure
keeps your hackers happy (I doubt anyone would pay $100+ for toy projects),
and also maximizes revenue from larger brand campaigns.

In conclusion, I think the assertion that Snapchat "has no intrinsic value" is
complete bollocks.

------
OGC
This just dances around the issue that snapchat is probably used to take lots
of nude pictures. Yes, you can take a screenshot, i bet loads of people don't
know / trust the other party to not to take one.

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sp332
People are outraged over being spied on, but can't see the value in an private
chat tool?

Edit I meant private, not anonymous.

~~~
tlrobinson
You think Snapchat is in any way anonymous or private?

~~~
skrebbel
Yes, in every way that matters to most people.

~~~
tlrobinson
Except for the ways in which people are outraged over being spied upon.

~~~
skrebbel
I feel you, but you're conflating "angry, principled nerds" with "most
people". If you really think people outside your filter bubble are "outraged",
look further.

~~~
tlrobinson
I mostly agree, but I was responding to sp332's suggestion that Snapchat does
anything to solve the NSA "problem".

~~~
skrebbel
Ah, I must've read your comment out of context. My bad!

