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It is difficult to comment on whether Snap is overvalued without analyzing its potential worth. Instead, here are a few observations about Snap's business: * I

by panabee 10y ago

It is difficult to comment on whether Snap is overvalued without analyzing its potential worth. Instead, here are a few observations about Snap's business: * It seems unlikely Snap could plummet in popularity over a few months like some mobile game or Taylor Swift song. If Snap flames out, the usage graph will probably decay more like Skype than Draw Something. The two prongs of its platform allow Snap to (1) enable communication like Skype and (2) distribute content like YouTube. Distribution and communication companies tend to decline much slower than content creators like Zynga. * Snap's entertainment platform could finally crack interactive TV/video. This will be fascinating to watch unfold as Snap empowers content creators to create digestible, interactive video for the coveted advertising demographic of users aged 15-34. In particular, could adding a buy button marry video and commerce in a novel and lucrative way? * Through videos and pictures, Snap can infer a lot about users: style, hobbies, habits, food preferences, and more. This is also a hidden treasure trove for Instagram and Facebook, but given the high frequency of Snap messaging, the data could be richer and more authentic with Snap.

ribosometronome 10y ago
Given the nature of Snapchat, one would hope that mining pictures for data, as suggested in your third point, would turn away many users.
- panabee 10y ago
  It's unclear if they will mine pictures; the third point was merely speculation on what could present a valuable component of the business. That said, mining could be done in a non-creepy way similar to how Facebook mines data without alienating (too many) users.
intrasight 10y ago
Do you really think the teen to young adult demographic, who used Snapchat as a nude selfie channel, are going to be interested in Snap as a commercial media with ads channel?
- panabee 10y ago
  Extrapolating from personal anecdotes and media reports, the vast majority of Snaps may be non-nude messages. If true, Snap presents a very compelling medium for advertisers to reach teens and young adults. Moreover, the ads could get inserted into public Stories, which are less likely to include nudes, than private messagss. In this way, Snap would be similar to how TV networks monetize.
  - hulahoof 10y ago
    Well, yes, you could place ads wherever you wanted. Whether the userbase responds well to your ads is another story. Advertising in one-to-one messages feels very intrusive, I could see a market for direct marketing in the stories section however it would have to beat the indirect advertising marketers are currently paying the power users for.
panabee 10y ago
[Too late to edit the parent] The metric to monitor for Snap is daily engagement. Snap has all but confirmed it will not play the MAU game [0]. This doesn't mean Snap won’t try to expand the user base, but merely that maximizing MAUs isn’t the same priority as at Facebook. This strategy is risky because it means Snap must generate growth from somewhere other than user acquisition, which is the typical playbook for consumer startups. On the plus side, this frees Snap to pursue an Apple-like strategy of pushing the boundaries of coolness and innovation as opposed to diluting the service until it's vanilla enough to reach 1B+ users. The more mainstream your aims, the fewer risks you can afford with the core product. Strategically, it may let Snap sidestep the trap that ensnared Twitter. Twitter’s greatest sin was simply not being Facebook. Wall Street and the media need a foil for every market leader, and Twitter has been sadly shoved into this role. Playing the MAU game is playing Facebook’s game, and Zuckbergerg has so far dominated anyone who competes. Focusing on daily engagement offers a chance to battle the lion in water instead of on land, to position Snap as different from Facebook and pioneering a different market. Unseating Facebook as the #1 social network is extremely daunting for Snap, if not downright impossible. As Twitter today and AMD from the 1990s can attest, life as the #2 player can be challenging. Wall Street whacks you with much lower multiples, and the press is hardly any kinder. Whether Snap actually convinces Wall Street and others to value them as different from Facebook remains to be seen, but this route is not surprising given Twitter’s carnage. Even if Snap stumbles, what Spiegel and Murphy accomplished is nothing short of extraordinary. They grew a pure sexting app into a $30B communication and entertainment platform. This transformation didn't result from one "lucky" choice, but rather a series of risks and enhancements over multiple years. If you had given me 4-5 years to maximize the value of a sexting app, I think maybe, in the most optimistic scenario, with all the luck in the world, the app could have sold for $3M (with $0 as the likely scenario). What they did is 10000x greater than what I could have achieved under the same circumstances. [0] https://www.bloomberg.com/news/articles/2017-01-20/snap-said-to-stress-addicted-users-to-justify-20-billion-value https://www.bloomberg.com/news/articles/2017-01-20/snap-said...
- richardwhiuk 10y ago
  Why does it matter whether Snap will play the MAU game? That's what analysts will be measuring them on, whether they choose to acknowledge that or not.

by panabee 10y ago

ribosometronome 10y ago

Given the nature of Snapchat, one would hope that mining pictures for data, as suggested in your third point, would turn away many users.

panabee 10y ago
It's unclear if they will mine pictures; the third point was merely speculation on what could present a valuable component of the business. That said, mining could be done in a non-creepy way similar to how Facebook mines data without alienating (too many) users.

intrasight 10y ago

Do you really think the teen to young adult demographic, who used Snapchat as a nude selfie channel, are going to be interested in Snap as a commercial media with ads channel?

panabee 10y ago
Extrapolating from personal anecdotes and media reports, the vast majority of Snaps may be non-nude messages. If true, Snap presents a very compelling medium for advertisers to reach teens and young adults. Moreover, the ads could get inserted into public Stories, which are less likely to include nudes, than private messagss. In this way, Snap would be similar to how TV networks monetize.
- hulahoof 10y ago
  Well, yes, you could place ads wherever you wanted. Whether the userbase responds well to your ads is another story. Advertising in one-to-one messages feels very intrusive, I could see a market for direct marketing in the stories section however it would have to beat the indirect advertising marketers are currently paying the power users for.

panabee 10y ago

[Too late to edit the parent] The metric to monitor for Snap is daily engagement. Snap has all but confirmed it will not play the MAU game [0]. This doesn't mean Snap won’t try to expand the user base, but merely that maximizing MAUs isn’t the same priority as at Facebook. This strategy is risky because it means Snap must generate growth from somewhere other than user acquisition, which is the typical playbook for consumer startups. On the plus side, this frees Snap to pursue an Apple-like strategy of pushing the boundaries of coolness and innovation as opposed to diluting the service until it's vanilla enough to reach 1B+ users. The more mainstream your aims, the fewer risks you can afford with the core product. Strategically, it may let Snap sidestep the trap that ensnared Twitter. Twitter’s greatest sin was simply not being Facebook. Wall Street and the media need a foil for every market leader, and Twitter has been sadly shoved into this role. Playing the MAU game is playing Facebook’s game, and Zuckbergerg has so far dominated anyone who competes. Focusing on daily engagement offers a chance to battle the lion in water instead of on land, to position Snap as different from Facebook and pioneering a different market. Unseating Facebook as the #1 social network is extremely daunting for Snap, if not downright impossible. As Twitter today and AMD from the 1990s can attest, life as the #2 player can be challenging. Wall Street whacks you with much lower multiples, and the press is hardly any kinder. Whether Snap actually convinces Wall Street and others to value them as different from Facebook remains to be seen, but this route is not surprising given Twitter’s carnage. Even if Snap stumbles, what Spiegel and Murphy accomplished is nothing short of extraordinary. They grew a pure sexting app into a $30B communication and entertainment platform. This transformation didn't result from one "lucky" choice, but rather a series of risks and enhancements over multiple years. If you had given me 4-5 years to maximize the value of a sexting app, I think maybe, in the most optimistic scenario, with all the luck in the world, the app could have sold for $3M (with $0 as the likely scenario). What they did is 10000x greater than what I could have achieved under the same circumstances. [0] https://www.bloomberg.com/news/articles/2017-01-20/snap-said-to-stress-addicted-users-to-justify-20-billion-value https://www.bloomberg.com/news/articles/2017-01-20/snap-said...

richardwhiuk 10y ago
Why does it matter whether Snap will play the MAU game? That's what analysts will be measuring them on, whether they choose to acknowledge that or not.