RUSF18
Footballguy
If you don't know how to short a stock, you probably shouldn't be shorting stock.
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Snapchat - $3 Billion Acquisition Offer from Facebook (1 Viewer)
- Thread starter Arizona Ron
- Start date
Hilts
Footballguy
You guys would take the money and run. So would I. That's what most folks would do. But the founder obviously isn't most folks. Most folks wouldn't have built it up this much to begin with. I can totally understand turning it down. If you believe you have a good product and will continue to grow for the foreseeable future, no reason to think the value will vanish over the next year or so.
Arizona Ron
Footballguy
If someone is willing to pay $3 Billion for it, I'm sure someone is willing to throw money at creating an alternative.
This technology didn't cost nearly $3 Billion to create, I'm just surprised FB wouldn't just try to duplicate it.
Eephus
Footballguy
Hilts
Footballguy
1 - As Eephus pointed out, legally it wouldn't be so easy. http://techcrunch.com/2013/06/21/snapchat-has-a-patent-that-could-help-it-become-the-defacto-camera-app/
2 - Even if someone created a similar product, it's no guarantee they'd capture the users. See google+ vs. Facebook.
Dr Oadi
Footballguy
Guys taking a gamble that the Chinese will actually pay 4 billion. Face will be the eventual buyer. Owner will be lucky if its for one million dollars :drevil:
Ilov80s
Footballguy
FB also is not cool. FB is your mom and dad's social media. SC, Twitter, Instagram, Tumblr, and Ask.fm are hip and not flooded with older family members.
jamny
Footballguy
This. The first time I heard of Twitter I Thought it was idiotic and would never take off. Now I use it more than FB and so do most of the people I know(25-30 year olds). It'll eventually be bigger than FB. Maybe the people of Snapchat believe that same thing and wanna continue the project they created.
Google offered 4B the day after FB offered 3.
Dexter
Footballguy
It's not the tech FB wants it's the people. anyone can do this and there are probably dozen of other services just like this. Fortunately for this guy, his is the one which took off.
Ilov80s
Footballguy
They aren't. They are all very big amongst young users. Teens use FB as well. They just have a lesser opinion of it and are using it less.
Chase Stuart
Footballguy
Arizona Ron
Footballguy
I found this interesting:
Shane Snow, Journalist, Geek, CCO of ContentlyThis week, Business Insider chief Henry Blodget wrote a post titled, "EXCLUSIVE: How Snapchat Plans To Make Money." With a juicy title like that, one couldn't help but click.
The disappearing MMS app, Snapchat, is as hot as a startup can be right now. Recent reports say its board turned down a $3 billion buyout offer from Facebook, even though Snapchat makes no money. The news has caused a flurry of speculation—what does Snapchat know that we don't know?—and hungry social media consultants and marketers are eagerly pointing to it as evidence that you should spend money on this, guys!
The fact remains: Snapchat itself doesn't make money. Facebook bid the $3b on it in order to eliminate the threat of a future competitor, not because it's a promising revenue source. Turning Zuck's money down means Snapchat's founders need to inch toward a real business or generate a real asset (like Twitter has), before the hype bubble pops.
I think they're screwed. Snapchat, I predict, will be the next Formspring or Chatroulette, that mega-hot thing that all the kids were on until suddenly they weren't.
Enter Henry Blodget, with the low-down on Snapchat's real revenue opportunity.
What could Mr. Blodget's "exclusive" info be? Thirty-one paragraphs into the post, he tells us.
Drumroll, please. . .
Advertising!
Take a minute to let that sink in. I know, it's a shocking idea, but leave it to a couple of twenty-year-old social network tycoons to think outside of the box and turn the business world on its head with... ads.
In Blodget's defense, he also suggested Snapchat could make money selling virtual goods, or upgraded digital trinkets you can send your friends via exploding text. Side note: virtual goods are the #1 way most game apps make money, so that's an obvious idea, too. Also, btw, no sustainable business of more than a dozen or so employees has been built on virtual goods. (Zynga, the most notable example of a virtual goods business, is in the stock market toilet.)
Those two revenue models are not likely to uphold a $3 billion+ business in any sustainable way, without additional value generation of some sort.
As The New Yorker's Matt Buchanan astutely pointed out, the reason Snapchat turned the money down is because its backers think it's going to be worth more than $3b in the future. They don't want another Instagram, which is now largely accepted as worth more than the $1 billion Facebook spent on it. I'll go a step further and suggest that maybe Snapchat's early shareholders gave up voting control on their board of directors when they took $20 million off the table in secondary shares this summer, and that the new investors are now the ones making the call not to sell while they can.
Or maybe they all really think they have a business opportunity. They have certainly built a cool product. But I'll contend that Snapchat's team missed its opportunity to make money by not taking the money, and that their business is ultimately doomed for the following reasons:
1) Snapchat's key feature is exactly the reason it can't become a business.
The core value of Snapchat is the messages one sends disappear into the ether. There's no data trail. Unfortunately, that means that there's nothing to lock users in the more they use it. Facebook, for example, is full of frustrated users who want to leave but keep an account because all their photos are there, all their conversations are there, and "what if someone needs to contact me?"
Snapchat, on the other hand, uses your existing address book on your phone. Your network is not locked up in the app. You can quit Snapchat tomorrow and still have your network. And your history of photos and conversations and data? The point of Snapchat is they're not there.
Not good if Snapchat's going to try to keep people around and "monetize" them.
2) Snapchat's technology is easy to replicate.
Exploding messages was novel when Snapchat came out, but the team isn't breaking new ground tech-wise. I think the "impermanence" of data concept Snapchat brought to collective attention is going to be important to the future of communication and the Web, but an exact replica of Snapchat's actual tech could be built by a couple of coders in a single weekend. (Yes, Snapchat now has tons of servers and data-handling issues that require a lot of technical expertise, but again, we're not reinventing the wheel.)
That's a problem, because...
3) When Snapchat introduces ads, users will flee.
One thing the young generation that uses Snapchat is real adept at is avoiding advertising. Savvy web and mobile users, in general, are good at that. That's, coincidentally, why there's a huge movement in digital marketing away from brands serving banner ads and toward brands telling stories—content marketing.
Face it: kids don't like ads. As soon as Snapchat users start getting Snaps from Ford Focus and Citibank, they're going to start thinking Snapchat's about as cool as junk mail. The word they're going to use is Spam.
Sure, some advertisers will come up with really funny ads that won't bother users; they'll try to fit the medium. But it's going to ruin the user experience, and the users don't have a good reason to deal with bad UX.
(When that happens, I'm launching "Shanechat." It will be ad-free forever, and all the cool kids will come in droves! Although, a dozen other app-makers will probably beat me to it.)
Everyone's hyped about Snapchat because all the kids are on it. Adults don't understand it in the way they don't understand why kids would spend so much time playing Grand Theft Auto. That doesn't mean it's not a business. It's not a business because the only thing it has going for it is user growth, but that user growth is not generating any sustainable assets or lock-in. And "Well, you fusty adults don't understand it!" is not a good answer to, "How will you make money?"
Look, it may be easy to build an app, but it's hard to build a business. The Snapchat team is certainly working hard to create something that has an impact, and they're betting that they can be the next big thing. If they pull it off, it will be against serious odds and naysayers like me, and kudos to them. But if I were a betting man, I would put all my chips in against them.
Snapchat-backers and marketers may hate to hear this. But their comments will disappear after 5 seconds.
Shane Snow, Journalist, Geek, CCO of ContentlyThis week, Business Insider chief Henry Blodget wrote a post titled, "EXCLUSIVE: How Snapchat Plans To Make Money." With a juicy title like that, one couldn't help but click.
The disappearing MMS app, Snapchat, is as hot as a startup can be right now. Recent reports say its board turned down a $3 billion buyout offer from Facebook, even though Snapchat makes no money. The news has caused a flurry of speculation—what does Snapchat know that we don't know?—and hungry social media consultants and marketers are eagerly pointing to it as evidence that you should spend money on this, guys!
The fact remains: Snapchat itself doesn't make money. Facebook bid the $3b on it in order to eliminate the threat of a future competitor, not because it's a promising revenue source. Turning Zuck's money down means Snapchat's founders need to inch toward a real business or generate a real asset (like Twitter has), before the hype bubble pops.
I think they're screwed. Snapchat, I predict, will be the next Formspring or Chatroulette, that mega-hot thing that all the kids were on until suddenly they weren't.
Enter Henry Blodget, with the low-down on Snapchat's real revenue opportunity.
What could Mr. Blodget's "exclusive" info be? Thirty-one paragraphs into the post, he tells us.
Drumroll, please. . .
Advertising!
Take a minute to let that sink in. I know, it's a shocking idea, but leave it to a couple of twenty-year-old social network tycoons to think outside of the box and turn the business world on its head with... ads.
In Blodget's defense, he also suggested Snapchat could make money selling virtual goods, or upgraded digital trinkets you can send your friends via exploding text. Side note: virtual goods are the #1 way most game apps make money, so that's an obvious idea, too. Also, btw, no sustainable business of more than a dozen or so employees has been built on virtual goods. (Zynga, the most notable example of a virtual goods business, is in the stock market toilet.)
Those two revenue models are not likely to uphold a $3 billion+ business in any sustainable way, without additional value generation of some sort.
As The New Yorker's Matt Buchanan astutely pointed out, the reason Snapchat turned the money down is because its backers think it's going to be worth more than $3b in the future. They don't want another Instagram, which is now largely accepted as worth more than the $1 billion Facebook spent on it. I'll go a step further and suggest that maybe Snapchat's early shareholders gave up voting control on their board of directors when they took $20 million off the table in secondary shares this summer, and that the new investors are now the ones making the call not to sell while they can.
Or maybe they all really think they have a business opportunity. They have certainly built a cool product. But I'll contend that Snapchat's team missed its opportunity to make money by not taking the money, and that their business is ultimately doomed for the following reasons:
1) Snapchat's key feature is exactly the reason it can't become a business.
The core value of Snapchat is the messages one sends disappear into the ether. There's no data trail. Unfortunately, that means that there's nothing to lock users in the more they use it. Facebook, for example, is full of frustrated users who want to leave but keep an account because all their photos are there, all their conversations are there, and "what if someone needs to contact me?"
Snapchat, on the other hand, uses your existing address book on your phone. Your network is not locked up in the app. You can quit Snapchat tomorrow and still have your network. And your history of photos and conversations and data? The point of Snapchat is they're not there.
Not good if Snapchat's going to try to keep people around and "monetize" them.
2) Snapchat's technology is easy to replicate.
Exploding messages was novel when Snapchat came out, but the team isn't breaking new ground tech-wise. I think the "impermanence" of data concept Snapchat brought to collective attention is going to be important to the future of communication and the Web, but an exact replica of Snapchat's actual tech could be built by a couple of coders in a single weekend. (Yes, Snapchat now has tons of servers and data-handling issues that require a lot of technical expertise, but again, we're not reinventing the wheel.)
That's a problem, because...
3) When Snapchat introduces ads, users will flee.
One thing the young generation that uses Snapchat is real adept at is avoiding advertising. Savvy web and mobile users, in general, are good at that. That's, coincidentally, why there's a huge movement in digital marketing away from brands serving banner ads and toward brands telling stories—content marketing.
Face it: kids don't like ads. As soon as Snapchat users start getting Snaps from Ford Focus and Citibank, they're going to start thinking Snapchat's about as cool as junk mail. The word they're going to use is Spam.
Sure, some advertisers will come up with really funny ads that won't bother users; they'll try to fit the medium. But it's going to ruin the user experience, and the users don't have a good reason to deal with bad UX.
(When that happens, I'm launching "Shanechat." It will be ad-free forever, and all the cool kids will come in droves! Although, a dozen other app-makers will probably beat me to it.)
Everyone's hyped about Snapchat because all the kids are on it. Adults don't understand it in the way they don't understand why kids would spend so much time playing Grand Theft Auto. That doesn't mean it's not a business. It's not a business because the only thing it has going for it is user growth, but that user growth is not generating any sustainable assets or lock-in. And "Well, you fusty adults don't understand it!" is not a good answer to, "How will you make money?"
Look, it may be easy to build an app, but it's hard to build a business. The Snapchat team is certainly working hard to create something that has an impact, and they're betting that they can be the next big thing. If they pull it off, it will be against serious odds and naysayers like me, and kudos to them. But if I were a betting man, I would put all my chips in against them.
Snapchat-backers and marketers may hate to hear this. But their comments will disappear after 5 seconds.
cstu
Footballguy
Snapchat is all grown up:
Snapchat seamlessly combines video, audio, GIFs, stickers in “Chat 2.0”
I've been a Whatapp user but I just installed Snapchat for the first time.
Snapchat seamlessly combines video, audio, GIFs, stickers in “Chat 2.0”
I've been a Whatapp user but I just installed Snapchat for the first time.
GOB
Footballguy
jonessed
Footballguy
Twitter just laid off 10% of its workforce.
Cool and unprofitable has a limited lifespan. They need to figure out how to make money.
Leeroy Jenkins
Footballguy
If I had an account, can my followers or whatever see who I follow, or is that private?
dfsguy
Footballguy
use ad-block plus extension for your browser.
lol, didn't realize i was reading an old thread.
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GOB
Footballguy
James Daulton
Footballguy
No ####### way that stupid app is worth anywhere near that kind of money. Another "cool" app will come along and snapchat will become myspace 6.0
sbonomo
Footballguy
huh...link? I stand corrected: http://www.bloomberg.com/news/articles/2016-02-01/fidelity-writes-down-snapchat-holding-by-63-percent
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GOB
Footballguy
Major
Footballguy
The "stupid app" now valued at roughly $20bn: http://techcrunch.com/2016/05/23/sources-snapchat-is-raising-more-money-at-about-a-20-billion-valuation/
Major
Footballguy
I'm not an avid user but I think there are options where you can add on features to your face, etc…it's primarily a short video sharing site. Sort of like a Twitter for vids.
GOB
Footballguy
sporthenry
Footballguy
The issue is how do you monetize it? Seems like another example of private valuations out of whack. Facebook at least has customer data. Hard to imagine snap chat gets that kind of info.
Abraham
Footballguy
That's because you aren't thinking about what the future of data collection looks like. The data SC can collect is actually MORE material to advertisers than FB. Imagine visual recognition software that figures out where you are in the video and your online experience becomes inundated with that stuff. Snapchat something while on the Gondola at Crested Butte? Guess who is getting hammered with ski trip offers and ski stuff for sale. Pic with your friends at Starbucks...same...
I don't think it's worth near what it's valued at, but the data collection part isn't up for discussion.
bagger
Footballguy
Yeah what a PE company is "worth" is one of the biggest bubbles out there right now.
Take it public and see what the true value would be.
Quez
Footballguy
They already have a few creative ways they are monetizing Snapchat. Some of the face transformations are available for sale. They also are doing custom ones to promote things like the Xmen movie. You can make your face look like the characters in the movie. I'm sure the sponsors are paying a nice chunk of change for these.
They also have snap stories of large events, like sports games, holidays, etc. Some of the events they cover for example are, The super bowl, Kentucky Derby, Dawali, the Arnold Classic, etc. They take snaps from all the people there, and make a cool snap story. It's a great way to kind of get a feel for the atmosphere at one of these events. In these stories they have inserted commercials.
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jonessed
Footballguy
These valuations are made by the investor groups who own large parts of the same companies. The high valuations keep capital flowing in and allow the companies to attract talent.
Snapchat may end up being worth $20B or more, but it would be the exception. Only a handful of these companies will ever live up to their valuations.
James Daulton
Footballguy
Something new and flashier has always been right around the corner. If nothing unseats this app, good for it.
![[icon]](/data/avatars/m/5/5167.jpg?1660313464){kind=avatar}
[icon]
Insoxicated
They sell event/regional based advertising as well. Someone on our BBQfest team paid to upload a "BBQfest Usual Saucepects" photo frame that people could add to snaps taken within 2mi of the event that weekend. I can see that being a legit form of revenue for events.
bagger
Footballguy
Major
Footballguy
There have definitely been a handful of tech companies that were overpriced during the private rounds in past years, mainly bubble induced. I don't think investors see the easy IPO route anymore. The capital markets window is shut for many (hence market conditions changing). Facebook which is its closest comp seemed to price and perform just fine. Granted, both companies are probably outliers but that's kind of my point. Snapchat is for real.
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