Slashdot Mirror
Why Snapchat and Its Ilk Face a Revenue Conundrum
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."
... should have taken the offered cash and start a new venture, producing more in long term value.
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
"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
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?
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*.
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.
So, Snapchat's wild success is from people paranoid of the NSA who use it to send messages, even though multiple stories have appeared about how Snapchat messages can be saved without the sender's knowledge, and Snapchat's own website lists conditions under which messages will be preserved. Riiiiight.
Even assuming it doesn't store images (which it does, see above), to use the application, you connect with people as in any other social networking application. This is definitely "user information," and this metadata (some might even call it data) has value.
There was. Google supposedly offered them 4 billion:
http://bgr.com/2013/11/15/snapchat-google-buyout-rumor/
Snapchat is gambling that they will keep growing to the point where they can get an even bigger offer.
Meanwhile, how did that Instagram purchase pan out? Anybody know if it's been worth the $1B that Facebook spent on it?
Koans and fables for the software engineer
I Once FB invests sufficient money into developing and marketing their own version, Snapshat will be worth peanuts.
I've heard the internal code name for it is CrotchBook.
Some drink at the fountain of knowledge. Others just gargle.