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My rule of thumb for awhile has been that if you can get one hundred million users (100,000,000) you can sell your company for one billion dollars ($1,000,000,0

My rule of thumb for awhile has been that if you can get one hundred million users (100,000,000) you can sell your company for one billion dollars ($1,000,000,000). It doesn't matter if you have any revenue or not, 100m users = 1b dollars. Snapchat is at 200m users, but has doubled since August. If you think it's headed for 500m users then 10b is only a 2x premium for an unusually large pool of users in one place. WhatsApp sold for 18b with 500m users. It was headed for 1b users so 18b is a similar 2x premium. At first I thought the math didn't work but I guess it does. Users are king. Engaged users are directly convertible to money.

flyinglizard 12y ago
First, not all users are equal. It could be that the userbase of Snapchat is especially important (being young trendsetters) rather than the mass of users joining because all their friends are there. Second, when Facebook bought WhatsApp, it wasn't for monetization but for taking a threat off the market. WhatsApp and Facebook compete for the time of the same users; I don't think you could ever put the actual financial value of WhatsApp at $20b; but it could very well interfere with the plans of your $100b+ business which goes after the time and networking effect of the same users. I feel like at this point Snapchat and Facebook are playing chicken. This will end up as an acquisition deal. Snapchat could never monetize to warrant that valuation, while Facebook would pay a lot of money to, again, win the engagement of these users slipping away from its platform. There aren't too many ways Snapchat could translate its paper value into cash: only an IPO (not a chance, they're not IPO material) or an acquisition by Google, Microsoft or Facebook (others aren't big enough for placing this bet, and Apple doesn't seem to care enough about services to make such an acquisition, especially with the slightly shady element of the Snapchat concept). So Snapchat and its investors will come together to push the value higher and higher until one of the tech giants break and buys the thing. I doubt Snapchat remain an independent entity while justifying this valuation. They are in competition with the next big thing.
deleted 12y ago
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AndrewKemendo 12y ago
Engaged users are directly convertible to money. I don't see how this is a given. Monetization is no simple task, otherwise Snapchat etc... would have a fairly straightforward way of implementing it without disrupting the core business. Last I checked there is no good strategy and the in-app purchases doesn't seem to be working that well outside of games. The idea of push ads like they are doing with their snapchat self-promotion stuff is a recipe for disaster from unsolicited companies.
- yellow_and_gray 12y ago
  Establishing a monopoly is more valuable than monetizing, which is what Snapchat has. You can monetize later, but you can't snatch all the users later.
- elberto34 12y ago
  making money is almost never a problem. Everyone says it is and then the said company blows the doors off expectations . Facebook did it with mobile in 2012 when all the experts said it couldn't be done. Mobile engagement is higher than desktop. Look at amazon and how long wall st. has ignored profits. All the company need to do is flip a switch and the money will pour in, and the users won't leave either, despite all the predictions that they should.
  - MichaelGG 12y ago
    Maybe Snapchat should sell that money switch to Twitter. So far, they're only alive by raising more and more money. Same for Splunk, box, and others.
  - AndrewKemendo 12y ago
    Look at amazon and how long wall st. has ignored profits. Totally different. Amazon has revenue - they just take that revenue and pump it back in. Snapchat etc... doesn't and can't even prove they will have revenue.
- forrestthewoods 12y ago
  Monetizing users is hard as hell. Selling highly engaged users to investors to let them take a crack at monetization is easy. That's the conversion I was referring to.
MichaelGG 12y ago
Users are king? Is that different than eyeballs?

flyinglizard 12y ago

First, not all users are equal. It could be that the userbase of Snapchat is especially important (being young trendsetters) rather than the mass of users joining because all their friends are there. Second, when Facebook bought WhatsApp, it wasn't for monetization but for taking a threat off the market. WhatsApp and Facebook compete for the time of the same users; I don't think you could ever put the actual financial value of WhatsApp at $20b; but it could very well interfere with the plans of your $100b+ business which goes after the time and networking effect of the same users. I feel like at this point Snapchat and Facebook are playing chicken. This will end up as an acquisition deal. Snapchat could never monetize to warrant that valuation, while Facebook would pay a lot of money to, again, win the engagement of these users slipping away from its platform. There aren't too many ways Snapchat could translate its paper value into cash: only an IPO (not a chance, they're not IPO material) or an acquisition by Google, Microsoft or Facebook (others aren't big enough for placing this bet, and Apple doesn't seem to care enough about services to make such an acquisition, especially with the slightly shady element of the Snapchat concept). So Snapchat and its investors will come together to push the value higher and higher until one of the tech giants break and buys the thing. I doubt Snapchat remain an independent entity while justifying this valuation. They are in competition with the next big thing.

deleted 12y ago

[deleted]

AndrewKemendo 12y ago

Engaged users are directly convertible to money. I don't see how this is a given. Monetization is no simple task, otherwise Snapchat etc... would have a fairly straightforward way of implementing it without disrupting the core business. Last I checked there is no good strategy and the in-app purchases doesn't seem to be working that well outside of games. The idea of push ads like they are doing with their snapchat self-promotion stuff is a recipe for disaster from unsolicited companies.

yellow_and_gray 12y ago
Establishing a monopoly is more valuable than monetizing, which is what Snapchat has. You can monetize later, but you can't snatch all the users later.
elberto34 12y ago
making money is almost never a problem. Everyone says it is and then the said company blows the doors off expectations . Facebook did it with mobile in 2012 when all the experts said it couldn't be done. Mobile engagement is higher than desktop. Look at amazon and how long wall st. has ignored profits. All the company need to do is flip a switch and the money will pour in, and the users won't leave either, despite all the predictions that they should.
- MichaelGG 12y ago
  Maybe Snapchat should sell that money switch to Twitter. So far, they're only alive by raising more and more money. Same for Splunk, box, and others.
- AndrewKemendo 12y ago
  Look at amazon and how long wall st. has ignored profits. Totally different. Amazon has revenue - they just take that revenue and pump it back in. Snapchat etc... doesn't and can't even prove they will have revenue.
forrestthewoods 12y ago
Monetizing users is hard as hell. Selling highly engaged users to investors to let them take a crack at monetization is easy. That's the conversion I was referring to.

MichaelGG 12y ago

Users are king? Is that different than eyeballs?