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"It makes infinity times more money than snapchat, but has a thirtieth of the valuation. What is going on?" A valuation isn't just based on how much money a co

"It makes infinity times more money than snapchat, but has a thirtieth of the valuation. What is going on?" A valuation isn't just based on how much money a company makes right now. It's based on how much money the company's expected to make over its lifetime. Snapchat's valuation [1] is based on expectations of high future revenue. (There was a point where Facebook & Twitter had 0 revenue, too. Now they're both multi-billion dollar public companies.) These stories always cause scepticism, especially in the HN crowd. It's the most common response ("What?! 4 BILLION!?"), and an easy one (i.e. doesn't require much thought), but it's the wrong one. Sure, you can argue over the exact number, but let's consider the reverse claim: are you really willing to bet that an app that processes 350m+ messages every day is worth nothing? If not, what would you value it at? Answering that question requires hard thought; reflexive scepticism doesn't. And if you were really imaginative & thought it through, you'd probably arrive at quite a high number. For many consumer apps, the path to market dominance involves offering a service for free at first, and then 'monetizing' later on. The whole point of venture capital is to allow that (common) pattern to happen; the result is massive companies - like Dropbox and Airbnb - that weren't always cashflow positive, and that meaningfully benefit the world. Perhaps it was crazy of Snapchat to turn down $3 billion, and maybe they really are overvalued, but it seems obvious that they are worth a lot of money [2]. [1] Although valuations make great media stories, valuation is really not that meaningful a number for private VC-funded companies. [2] If you don't agree, consider that both Mark Zuckerberg & the founders of Snapchat disagree with you. So either you're smarter than Mark Zuckerberg & the founders of Snapchat, or you're probably wrong.

dsl 13y ago
Snapchat needs to be valued not as a social network, maybe as a amateur porn company. I have lots of friends who use Snapchat (mostly the teen to college demographic), and they all use it for photos that they don't want other people to ever see. They use iMessage or Whatsapp for everything normal. The user generated content literally disappears in 10 seconds, and you are left with... nothing.
- nqureshi 13y ago
  As I understand it, your argument is: 1. Some friends I know use Snapchat for 'photos they don't want other people to see'. 2. Therefore, most people use Snapchat to send porn. 3. Therefore, Snapchat should be valued as an amateur porn company. Do you really believe that's a valid argument? And that all of the 350m+ photos sent on Snapchat every day are porn?
  - dsl 13y ago
    Yes. No.
- jaynos 13y ago
  Ctrl+PrintScreen or WindowsKey+PrintScreen (if you want to be fancy).
  - tanzam75 13y ago
    > Ctrl+PrintScreen or WindowsKey+PrintScreen (if you want to be fancy). You actually don't need the Ctrl key. Just PrintScreen will also do the same thing. WindowsKey + PrintScreen is a nice idea. Problem is, I usually do Alt + PrintScreen. Adding the Windows key doesn't do anything in that case.
  - renata 13y ago
    SnapChat does notify the sending user if you take a screenshot in any conventional fashion.
    - jaynos 13y ago
      Thanks for letting me know. I've never used the service, but it's good to know that they thought of that.
- objclxt 13y ago
  > The user generated content literally disappears in 10 seconds, and you are left with... nothing It doesn't disappear, and whilst it might disappear off their servers I can guarantee that won't be the case in the future. At some point a court is going to force SnapChat to preserve a user's photos on their systems, probably someone under a wiretap or surveillance. I wouldn't be totally surprised if this hadn't happened already.
boucher 13y ago
Yes, I'm willing to believe it's worth nothing. I'm actually willing to believe it's worth less than nothing; that the cost of running a service processing that much data for free may be higher than the service is truly worth. I'm not saying that's the case here, but it really is not hard to imagine. It's quite obviously possible when you're giving away physical things for free. The only difference here is that free software is a hell of a lot cheaper than free cupcakes, but the cost still isn't zero.
- aclements18 13y ago
  Question: If you were to have a CS grad from Stanford offer you 50% of all of his income for the rest of his life. How much would you pay in one lump sum? $100? $1 million? Probably more… Point is, you would agree the number is not zero. He doesn't have a job yet (and never had a job before), but by any measure everyone that knows him says he's extremely talented. And now he's even getting huge job offers from Google and Facebook. Would you say that you wouldn't make that investment? Is he worthless cause he has an upcoming rent payment due and also has to feed himself?
  - greenyoda 13y ago
    It would be an extremely risky bet which I would never make. There's no guarantee that the grad wouldn't take your money and live the rest of his life as a heroin addict -- lots of smart people don't live up to their potential. Also, he might get hit by a bus tomorrow. Similarly, lots of companies run by smart people don't live up to their potentials, or are not lucky enough to be popular long enough to make billions of dollars.
    - aclements18 13y ago
      To be clear, you wouldn't pay $100 to get half of his signing bonus at Facebook? All of those factors (risks) have to be taken into consideration, and you price it as such. It's still a > zero figure.
      - 13y ago
semerda 13y ago
"It's based on how much money the company's expected to make over its lifetime." - So guess work right. Because a company that isn't generating revenue yet without a model yet is nothing more than speculation. Like you cannot reliably predict the stock market based on historical data alone. What this all means is that companies like Snapchat are all hype geared mainly for the ones with vested interest to get a quick cash out. There is nothing "lifetime". Kinda like the stock market where you see volume (demand) move thinking that supply will drop and price will go up so you make stupid decisions to jump in. As for Facebook, maybe Snapchat is worth that much to them. To Facebook it would increase their users engagement and spin the marketing engine. For the public market Snapchat is an over valued company based on speculation, hype and fueled by those with vested interests. There really is nothing stopping competitors from entering this space. There is no IP in timed photo sharing. Unless I missed something?

dsl 13y ago

Snapchat needs to be valued not as a social network, maybe as a amateur porn company. I have lots of friends who use Snapchat (mostly the teen to college demographic), and they all use it for photos that they don't want other people to ever see. They use iMessage or Whatsapp for everything normal. The user generated content literally disappears in 10 seconds, and you are left with... nothing.

nqureshi 13y ago
As I understand it, your argument is: 1. Some friends I know use Snapchat for 'photos they don't want other people to see'. 2. Therefore, most people use Snapchat to send porn. 3. Therefore, Snapchat should be valued as an amateur porn company. Do you really believe that's a valid argument? And that all of the 350m+ photos sent on Snapchat every day are porn?
- dsl 13y ago
  Yes. No.
jaynos 13y ago
Ctrl+PrintScreen or WindowsKey+PrintScreen (if you want to be fancy).
- tanzam75 13y ago
  > Ctrl+PrintScreen or WindowsKey+PrintScreen (if you want to be fancy). You actually don't need the Ctrl key. Just PrintScreen will also do the same thing. WindowsKey + PrintScreen is a nice idea. Problem is, I usually do Alt + PrintScreen. Adding the Windows key doesn't do anything in that case.
- renata 13y ago
  SnapChat does notify the sending user if you take a screenshot in any conventional fashion.
  - jaynos 13y ago
    Thanks for letting me know. I've never used the service, but it's good to know that they thought of that.
objclxt 13y ago
> The user generated content literally disappears in 10 seconds, and you are left with... nothing It doesn't disappear, and whilst it might disappear off their servers I can guarantee that won't be the case in the future. At some point a court is going to force SnapChat to preserve a user's photos on their systems, probably someone under a wiretap or surveillance. I wouldn't be totally surprised if this hadn't happened already.

boucher 13y ago

Yes, I'm willing to believe it's worth nothing. I'm actually willing to believe it's worth less than nothing; that the cost of running a service processing that much data for free may be higher than the service is truly worth. I'm not saying that's the case here, but it really is not hard to imagine. It's quite obviously possible when you're giving away physical things for free. The only difference here is that free software is a hell of a lot cheaper than free cupcakes, but the cost still isn't zero.

aclements18 13y ago
Question: If you were to have a CS grad from Stanford offer you 50% of all of his income for the rest of his life. How much would you pay in one lump sum? $100? $1 million? Probably more… Point is, you would agree the number is not zero. He doesn't have a job yet (and never had a job before), but by any measure everyone that knows him says he's extremely talented. And now he's even getting huge job offers from Google and Facebook. Would you say that you wouldn't make that investment? Is he worthless cause he has an upcoming rent payment due and also has to feed himself?
- greenyoda 13y ago
  It would be an extremely risky bet which I would never make. There's no guarantee that the grad wouldn't take your money and live the rest of his life as a heroin addict -- lots of smart people don't live up to their potential. Also, he might get hit by a bus tomorrow. Similarly, lots of companies run by smart people don't live up to their potentials, or are not lucky enough to be popular long enough to make billions of dollars.
  - aclements18 13y ago
    To be clear, you wouldn't pay $100 to get half of his signing bonus at Facebook? All of those factors (risks) have to be taken into consideration, and you price it as such. It's still a > zero figure.
    - 13y ago

semerda 13y ago

"It's based on how much money the company's expected to make over its lifetime." - So guess work right. Because a company that isn't generating revenue yet without a model yet is nothing more than speculation. Like you cannot reliably predict the stock market based on historical data alone. What this all means is that companies like Snapchat are all hype geared mainly for the ones with vested interest to get a quick cash out. There is nothing "lifetime". Kinda like the stock market where you see volume (demand) move thinking that supply will drop and price will go up so you make stupid decisions to jump in. As for Facebook, maybe Snapchat is worth that much to them. To Facebook it would increase their users engagement and spin the marketing engine. For the public market Snapchat is an over valued company based on speculation, hype and fueled by those with vested interests. There really is nothing stopping competitors from entering this space. There is no IP in timed photo sharing. Unless I missed something?