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Like I said, I am glad that those people have a sandbox to "interact" in. Do you honestly think that sandbox is worth $20b?

by gjolund 10y ago

nostrademons 10y ago
I think it's worth more, honestly. Probably $100-200B. That sandbox is a lot bigger than the sandbox you & I like to inhabit. The set of folks interested in technical programming & startup-related news probably numbers under 100K. I was an admin for a Harry Potter fansite in college that had 100K registered users, close to 1M when guests were counted, and we were far from the largest Harry Potter fansite. The set of folks who like clickbait, celebrity gossip, hanging out with friends, and making funny faces is a couple orders of magnitude larger than that, probably past a billion. People are very different in their refined passions but alike in their base desires. That means that anything that caters to base desires, by definition, will have a market size much, much bigger than sites that cater to refined passions.
- jonwachob91 10y ago
  $200B valuation with only $50MM in revenue... You must like bubbles, 'cause that's how you get bubbles.
  - nostrademons 10y ago
    I thought Facebook was way overvalued at $15B when they had zero in revenue. Now they've got about $20B in annual revenue and are worth $340B.
    - nickpsecurity 10y ago
      It's almost a good comeback. Yet, Facebook had obvious ways to monetize it's data plus lots of data types to monetize. It was inherent in its design. Also, semi-proven by MySpace. What is comparable for SnapChat? Seems more contrained.
      - jtblin 10y ago
        I remember hearing exactly the same about Facebook and even ... Google. Can't find the link anymore but there was a famous article from the NYT (IIRC) saying Google problem was finding a business model. Time will tell for snapchat.
      - nostrademons 10y ago
        The business model for SnapChat is the same as for TV ads (and for YouTube). Intersperse branded video advertising before the user can get to the content that they're actually seeking. TV ads is a $60-80B business. People in the 18-34 demographic (which in SnapChat's case really means the 13-29 demographic - I don't know anyone over the age of 30 that actually uses SnapChat) already spend 8x as much time on SnapChat as on TV. At some point, that attention imbalance will equilibrate, and SnapChat will be making a lot more than TV networks are.
        nickpsecurity 10y ago
        It's a possibility. They can just jump apps easily in this sector as it's more ephemeral by nature. What's odds of SnapChat staying popular enough for high-profit if they start interrupting conversations with video ads and alternatives exist? I imagine something similar to when SMS limitations were bullshit but WhatApp existed.
        nostrademons 10y ago
        That was what I said about Facebook when they came out (I'd been an early user of LiveJournal and AIM, a bunch of my friends were on MySpace, and I saw people migrating en masse between social platforms as they got bored with the previous one). I figured that the biggest risk to them wasn't irrelevance, it was that someone newer & hotter would come along. Turns out I was right - much of the Instagram and SnapChat usage is coming out of the pool of attention that previously belonged to Facebook - but the cycle time seems to be ~10 years, and getting longer with each generation of social software. If the history of mass culture & mass consumerism repeats itself, eventually the cycle time will be greater than a generation - forms of social interaction for the baby boomers stayed roughly constant for their whole lifetime. At that point it's meaningless to talk about shifts to the next big thing, because we'll all be dead before they happen.
    - rgbrenner 10y ago
      When facebook was valued at 15B, they had 150M in revenue: http://www.wired.com/2007/10/facebook-future/ http://www.wired.com/2007/10/facebook-future/ So if facebook is the benchmark, it doesn't support your valuation of $200B for snapchat with 50M in revenue.
- swombat 10y ago
  Your point still stands but I think 100k is a vast underestimate. I suspect there's much more than 100k in Silicon Valley/SF alone (though I don't live there so not sure). There's certainly tens of thousands in central London, let along across the world. Paul Graham alone (and he's hardly the only centre of attention in the startup world) has 340k followers on Twitter. I'd assume about 10m, give or take.
- gjolund 10y ago
  Are you honestly suggesting that a company with fewer than 200 employees is worth more than: * GM * Ford * Honda Combined. That is ridiculous and just highlights how big a bubble is brewing in SV. We value a couple hundred million fickle users more than hundreds of thousands of actual employees, physical factories, and entire supply chain industries.
  - nostrademons 10y ago
    This is a misunderstanding of where shareholder value comes from. The valuation (market cap) of a company is a reflection of the value of the assets that the company owns. That includes IP, trademarks, brand assets (somewhat perversely, this also includes user habits), business relationships & contracts, any resellable physical goods or cash that the company owns, and all future cash flows that will accrue to the company. Basically, the stuff that an employee, supplier, or customer could not take with them if they chose to do business with someone else. Now, there's also the concept of economic value, which is the value that customers of a company (or industry) are willing to spend on its product. This can be reasonably proxied by the total revenue of the industry - for your GM + Ford + Honda example, that's about $150B each, or $450B (and leaves out the 800 lb. gorilla, Toyota). That's a lot larger than the total $60-80B market for all brand advertising. But building cars has a long & large value chain. GM + Ford + Honda can't do it all on their own. They each employ roughly 200,000 people, many of whom are relatively highly paid thanks to union agreements. They have literally thousands of suppliers that they buy parts from. These suppliers themselves need to buy parts and supplies from labor-intensive industries like mining. As a result, the company captures comparatively little of the profit from all of this work. Facebook, for example, makes about $6B in net income off $20B in revenue, while GM makes $10B in profit off $150B in revenue. This also implies that further growth will benefit companies like Facebook or SnapChat much more than it would companies like GM: if margins stay the same, Facebook gets to $10B in profits with $30B in revenue, while GM would have to get to $300B in revenue (probably not happening) to get to $20B in profits. It's a plus, from a shareholder value perspective, that SnapChat only employs 200 or so people, and their largest expense is paying Google for AppEngine bills. It means that whatever value SnapChat creates, the shareholders will capture almost all of it. Indeed, based on how often car commercials appear on TV, it's likely that a good portion of GM & Ford's revenue will become SnapChat's profit, just like how a good portion of SnapChat's revenue becomes Google's profit.

Like I said, I am glad that those people have a sandbox to "interact" in. Do you honestly think that sandbox is worth $20b?

by gjolund 10y ago

Like I said, I am glad that those people have a sandbox to "interact" in. Do you honestly think that sandbox is worth $20b?

nostrademons 10y ago

I think it's worth more, honestly. Probably $100-200B. That sandbox is a lot bigger than the sandbox you & I like to inhabit. The set of folks interested in technical programming & startup-related news probably numbers under 100K. I was an admin for a Harry Potter fansite in college that had 100K registered users, close to 1M when guests were counted, and we were far from the largest Harry Potter fansite. The set of folks who like clickbait, celebrity gossip, hanging out with friends, and making funny faces is a couple orders of magnitude larger than that, probably past a billion. People are very different in their refined passions but alike in their base desires. That means that anything that caters to base desires, by definition, will have a market size much, much bigger than sites that cater to refined passions.

jonwachob91 10y ago
$200B valuation with only $50MM in revenue... You must like bubbles, 'cause that's how you get bubbles.
- nostrademons 10y ago
  I thought Facebook was way overvalued at $15B when they had zero in revenue. Now they've got about $20B in annual revenue and are worth $340B.
  - nickpsecurity 10y ago
    It's almost a good comeback. Yet, Facebook had obvious ways to monetize it's data plus lots of data types to monetize. It was inherent in its design. Also, semi-proven by MySpace. What is comparable for SnapChat? Seems more contrained.
    - jtblin 10y ago
      I remember hearing exactly the same about Facebook and even ... Google. Can't find the link anymore but there was a famous article from the NYT (IIRC) saying Google problem was finding a business model. Time will tell for snapchat.
    - nostrademons 10y ago
      The business model for SnapChat is the same as for TV ads (and for YouTube). Intersperse branded video advertising before the user can get to the content that they're actually seeking. TV ads is a $60-80B business. People in the 18-34 demographic (which in SnapChat's case really means the 13-29 demographic - I don't know anyone over the age of 30 that actually uses SnapChat) already spend 8x as much time on SnapChat as on TV. At some point, that attention imbalance will equilibrate, and SnapChat will be making a lot more than TV networks are.
      - nickpsecurity 10y ago
        It's a possibility. They can just jump apps easily in this sector as it's more ephemeral by nature. What's odds of SnapChat staying popular enough for high-profit if they start interrupting conversations with video ads and alternatives exist? I imagine something similar to when SMS limitations were bullshit but WhatApp existed.
        nostrademons 10y ago
        That was what I said about Facebook when they came out (I'd been an early user of LiveJournal and AIM, a bunch of my friends were on MySpace, and I saw people migrating en masse between social platforms as they got bored with the previous one). I figured that the biggest risk to them wasn't irrelevance, it was that someone newer & hotter would come along. Turns out I was right - much of the Instagram and SnapChat usage is coming out of the pool of attention that previously belonged to Facebook - but the cycle time seems to be ~10 years, and getting longer with each generation of social software. If the history of mass culture & mass consumerism repeats itself, eventually the cycle time will be greater than a generation - forms of social interaction for the baby boomers stayed roughly constant for their whole lifetime. At that point it's meaningless to talk about shifts to the next big thing, because we'll all be dead before they happen.
  - rgbrenner 10y ago
    When facebook was valued at 15B, they had 150M in revenue: http://www.wired.com/2007/10/facebook-future/ http://www.wired.com/2007/10/facebook-future/ So if facebook is the benchmark, it doesn't support your valuation of $200B for snapchat with 50M in revenue.
swombat 10y ago
Your point still stands but I think 100k is a vast underestimate. I suspect there's much more than 100k in Silicon Valley/SF alone (though I don't live there so not sure). There's certainly tens of thousands in central London, let along across the world. Paul Graham alone (and he's hardly the only centre of attention in the startup world) has 340k followers on Twitter. I'd assume about 10m, give or take.
gjolund 10y ago
Are you honestly suggesting that a company with fewer than 200 employees is worth more than: * GM * Ford * Honda Combined. That is ridiculous and just highlights how big a bubble is brewing in SV. We value a couple hundred million fickle users more than hundreds of thousands of actual employees, physical factories, and entire supply chain industries.
- nostrademons 10y ago
  This is a misunderstanding of where shareholder value comes from. The valuation (market cap) of a company is a reflection of the value of the assets that the company owns. That includes IP, trademarks, brand assets (somewhat perversely, this also includes user habits), business relationships & contracts, any resellable physical goods or cash that the company owns, and all future cash flows that will accrue to the company. Basically, the stuff that an employee, supplier, or customer could not take with them if they chose to do business with someone else. Now, there's also the concept of economic value, which is the value that customers of a company (or industry) are willing to spend on its product. This can be reasonably proxied by the total revenue of the industry - for your GM + Ford + Honda example, that's about $150B each, or $450B (and leaves out the 800 lb. gorilla, Toyota). That's a lot larger than the total $60-80B market for all brand advertising. But building cars has a long & large value chain. GM + Ford + Honda can't do it all on their own. They each employ roughly 200,000 people, many of whom are relatively highly paid thanks to union agreements. They have literally thousands of suppliers that they buy parts from. These suppliers themselves need to buy parts and supplies from labor-intensive industries like mining. As a result, the company captures comparatively little of the profit from all of this work. Facebook, for example, makes about $6B in net income off $20B in revenue, while GM makes $10B in profit off $150B in revenue. This also implies that further growth will benefit companies like Facebook or SnapChat much more than it would companies like GM: if margins stay the same, Facebook gets to $10B in profits with $30B in revenue, while GM would have to get to $300B in revenue (probably not happening) to get to $20B in profits. It's a plus, from a shareholder value perspective, that SnapChat only employs 200 or so people, and their largest expense is paying Google for AppEngine bills. It means that whatever value SnapChat creates, the shareholders will capture almost all of it. Indeed, based on how often car commercials appear on TV, it's likely that a good portion of GM & Ford's revenue will become SnapChat's profit, just like how a good portion of SnapChat's revenue becomes Google's profit.