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Why Snapchat and Its Ilk Face a Revenue Conundrum

Posted by samzenpus on from the show-me-the-money dept.

Nerval's Lobster writes "Snapchat managed to attract a lot of buzz in 2013—perhaps more than any other app on the market—and it's easy to see why: in these paranoid times, with the NSA allegedly sniffing around the world's collective inbox, and lots of software on the market designed to snoop into people's lives, it's comforting to have an app that'll vaporize your messages within seconds of their opening. Snapchat's executives see the startup's future as so bright, in fact, that they reportedly turned down a $3 billion buyout from Facebook. But whether Snapchat eventually accepts a buyout offer, or tries to parlay its popularity into some sort of IPO, it faces a rather unique problem: how do you make money off a free app that near-instantly vaporizes all content? Snapchat could emulate enterprise-centric vaporizing-message firms such as Silent Circle and start charging for subscriptions, but that would probably kill the service; a multitude of free rivals would likely spring up, with the express purpose of stealing irate customers away. More likely, Snapchat will probably launch some sort of display ad system, similar to what Facebook and Twitter have now—but given how it doesn't store user information on its servers, it'll probably be hard to monetize its users as extensively as those social networks. With that in mind, Snapchat might be left with two options going forward—either expand its services in a radical new (and more profitable) direction, or sell to a Tech Big Fish for a whole lot of money."

10 of 104 comments (clear)

  1. They simply... by spacefight · · Score: 5, Insightful

    ... should have taken the offered cash and start a new venture, producing more in long term value.

    1. Re:They simply... by Anonymous Coward · · Score: 4, Insightful

      ... should have taken the offered cash and start a new venture, producing more in long term value.

      ^THIS.

      They obviously started this company without a plan. And part of every business plan is an exit strategy - let alone HOW TO DRIVE REVENUES.

      That's why it's important tech entrepreneurs to get a business advisor if you don't have business experience.

  2. A Better Question by CanHasDIY · · Score: 4, Insightful

    Why the obsession with money? Seriously.

    Why is it, that unless somebody's making fat bank off a thing, the thing is considered to not be worth doing?

    --
    An enigma, wrapped in a riddle, shrouded in bacon and cheese
    1. Re:A Better Question by roman_mir · · Score: 3, Insightful

      You better explain to me who is paying their bills? They have employees, right? They are renting space somewhere, correct? They have servers running, so they bought those, isn't it so? How about energy and support and maintenance of those servers?

      So you better try and find an explanation how can a business live without making money and if the bills so far were paid by investors, then why are you surprised that investors want to see a return?

      --
      You can't handle the truth.
  3. Pretty simple, really by argStyopa · · Score: 4, Insightful

    "how do you make money off a free app that near-instantly vaporizes all content?"

    The annual payment you're getting from the NSA to make sure they're permanently on the cc list?

    --
    -Styopa
  4. Who cares? by DogDude · · Score: 3, Insightful

    Really, who cares if they can make money or not? That wasn't the whole point of Snapchat. Hell, it's not the point of 99% of tech companies these days. The point is to be bought by somebody else, not to make profit. Making profit is hard. Convincing some deep-pocketed sucker to buy you out is much easier.

    --
    I don't respond to AC's.
    1. Re:Who cares? by Arrepiadd · · Score: 5, Insightful

      The point is to be bought by somebody else, not to make profit.

      Then... why reject 3 billion from Facebook? How many other companies, with more money to waste, are willing to buy these guys, from where you are looking at it?

  5. More vaporized than a phone call? by BlueMonk · · Score: 4, Insightful

    How is the content exchanged on Snapchat any more ephemeral ("vaporized") than a phone call? Or isn't it? Just because it's "vaporized" from your perspective doesn't mean it wasn't captured *somewhere*.

  6. Yes. by Anonymous Coward · · Score: 5, Insightful

    Why is it, that unless somebody's making fat bank off a thing, the thing is considered to not be worth doing?

    If you are not making money, you can't pay for the infrastructure, help, taxes (like property taxes that you have to pay regardless of your profitability), and other expenses of running the firm - let alone paying yourself so you can pay for rent, food, healthcare, student loans, etc ....

    As far as them not taking the 3 billion, that's because they haven't planned and their hubris in thinking that, some how, they can make more on their own.

  7. Re:Doesn't store information? by HaZardman27 · · Score: 3, Insightful

    Because people that use Snapchat are people who care about privacy

    Please. The majority of users are using it because it's a fad.

    --
    Apparently wizard is not a legitimate career path, so I chose programmer instead.