7 ms·

The Bull Case for Snapchat

53 points by xenophon 10y ago

tschellenbach 10y ago
On the other hand they have zero user lock-in and are heavily losing money. That's a risky combination.
- argonaut 10y ago
  If they have zero user lock-in, then Instagram/Facebook have zero user lock-in too.
  - eunoia 10y ago
    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 10y ago
      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 10y ago
        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 10y ago
        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.
    - argonaut 10y ago
      That is valuable for advertising. It is of marginal value for users. Being able to stalk someone's history is not the main use case for Facebook/Instagram. My point is that the same friend network effects that Facebook/IG emjoy are also enjoyed by Snapchat.
- slackoverflower 10y ago
  If you used the product you would know there is a core feature that locks in users. Go google Snapchat Memories. I don't get why people make assumptions on products without using them.
  - Gaelan 10y ago
    Memories is not the core product, and I'd expect a lot of people don't use it.
sushisource 10y ago
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 10y ago
  >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.
  - ken47 10y ago
    Twitter is not the best example, as their struggles are well-known.
  - mjolk 10y ago
    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.
- adiabatty 10y ago
  A social network based around low-effort content (because pictures expire) among one's friends sounds like something that could be a useful permanent fixture of the landscape.
ditonal 10y ago
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.
- argonaut 10y ago
  I'm not sure where you're getting this idea that Twitter ads are not very valuable. Empirically, advertising is the one area of Twitter that's growing (total revenue, revenue per user, etc.). Its their user growth that has stalled. More abstractly, Twitter is very information-seeking / interest-oriented, which seems very ideal for advertising.
- wahnfrieden 10y ago
  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 10y ago
    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.
    - MegaButts 10y ago
      It might be more useful for brand awareness. Car companies don't advertise their products expecting to get a sale - they're doing it to strengthen their brand with consumers in general (more often than not for the people that already bought their product). I don't use Snapchat nor am I a marketing whiz, so I could be wrong.
paulpauper 10y ago
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 10y ago
  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.
- username223 10y ago
  > ... and the mobile rich media makes it ideal for advertisers, who pay a lot for those ads Until they don't. At some point, the companies making actual stuff that people use will realize that, despite the made-up "metrics," there's not much value in surveillance-based advertising. It's hardly better than the pile of paper you transfer from your mailbox to your recycle bin every day.
- trimbo 10y ago
  Myspace was founded only 6 months before Facebook!
nodesocket 10y ago
I'm sorry but the day I take financial news and advice from TechCrunch is the day I've official gone looney tunes.
aetherson 10y ago
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.
brockvond 10y ago
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.
aub3bhat 10y ago
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.
Grue3 10y ago
Snapchat will be the next biggest bust since Theranos and Magic Leap.
theincredulousk 10y ago
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.
- jpatokal 10y ago
  Facebook's market cap right now is $386B. If they play their cards right, Snapchat hitting one fourth of that is by no means impossible.
- ljlolel 10y ago
  Less space than a nomad
  - theincredulousk 10y ago
    The 50th messaging app with a friends list is the same technological advance as the iPod?
- nikcub 10y ago
  > 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

53 points by xenophon 10y ago

tschellenbach 10y ago

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

argonaut 10y ago
If they have zero user lock-in, then Instagram/Facebook have zero user lock-in too.
- eunoia 10y ago
  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 10y ago
    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 10y ago
      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 10y ago
        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.
  - argonaut 10y ago
    That is valuable for advertising. It is of marginal value for users. Being able to stalk someone's history is not the main use case for Facebook/Instagram. My point is that the same friend network effects that Facebook/IG emjoy are also enjoyed by Snapchat.
slackoverflower 10y ago
If you used the product you would know there is a core feature that locks in users. Go google Snapchat Memories. I don't get why people make assumptions on products without using them.
- Gaelan 10y ago
  Memories is not the core product, and I'd expect a lot of people don't use it.

sushisource 10y ago

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 10y ago
>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.
- ken47 10y ago
  Twitter is not the best example, as their struggles are well-known.
- mjolk 10y ago
  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.
adiabatty 10y ago
A social network based around low-effort content (because pictures expire) among one's friends sounds like something that could be a useful permanent fixture of the landscape.

ditonal 10y ago

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.

argonaut 10y ago
I'm not sure where you're getting this idea that Twitter ads are not very valuable. Empirically, advertising is the one area of Twitter that's growing (total revenue, revenue per user, etc.). Its their user growth that has stalled. More abstractly, Twitter is very information-seeking / interest-oriented, which seems very ideal for advertising.
wahnfrieden 10y ago
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 10y ago
  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.
  - MegaButts 10y ago
    It might be more useful for brand awareness. Car companies don't advertise their products expecting to get a sale - they're doing it to strengthen their brand with consumers in general (more often than not for the people that already bought their product). I don't use Snapchat nor am I a marketing whiz, so I could be wrong.

paulpauper 10y ago

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 10y ago
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.
username223 10y ago
> ... and the mobile rich media makes it ideal for advertisers, who pay a lot for those ads Until they don't. At some point, the companies making actual stuff that people use will realize that, despite the made-up "metrics," there's not much value in surveillance-based advertising. It's hardly better than the pile of paper you transfer from your mailbox to your recycle bin every day.
trimbo 10y ago
Myspace was founded only 6 months before Facebook!

nodesocket 10y ago

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

aetherson 10y ago

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.

brockvond 10y ago

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.

aub3bhat 10y ago

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.

Grue3 10y ago

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

theincredulousk 10y ago

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.

jpatokal 10y ago
Facebook's market cap right now is $386B. If they play their cards right, Snapchat hitting one fourth of that is by no means impossible.
ljlolel 10y ago
Less space than a nomad
- theincredulousk 10y ago
  The 50th messaging app with a friends list is the same technological advance as the iPod?
nikcub 10y ago
> 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