Snapchat is Intrinsically Worthless

We'll see if snapchat can hold the throne after serious monetization.

The correct answer is 'what someone will pay for it.' But I recognize that answer is unsatisfactory. Correct me if I am wrong, but I believe you are asking "What line of reasoning about Snapchat results in the highest valuation?" Or to put it differently, how does someone convince themselves that Snapchat could be worth billions rather than a few million at most.

I suspect the answer goes something like this;

1.) 13 - 24 year olds spend a big chunk of money (http://www.bls.gov/cex/2012/combined/age.pdf)

2.) They compose a cohort of approximately 50M individuals. (http://www.census.gov/popest/data/national/asrh/2012/index.h...)

3.) Smartphone ownership in this market is high, and skewed to the high income members (http://www.nielsen.com/us/en/newswire/2012/survey-new-u-s-sm...)

4.) At an estimate of 305MM 'snaps' per day, assuming multiple snaps per user. We can estimate that Snapchat has something north of 70% of the high income youth smart phones captured.

What is that worth? Can you entice them buy 1 thing? What is the biggest expense of any transient product? Customer acquisition. What would you pay to say something to nearly every customer in your market?

Well we know from the SuperBowl that 30 seconds of your time, once a year, might be worth $4M (http://variety.com/2013/tv/news/super-bowl-ads-fox-seeks-4m-...).

My guess is that if your in a product space that depends on consumers in this demographic, then being able to talk to them through SnapChat would be as valuable as a SuperBowl advertisement to you. And if you are an investor, owning a piece of that channel might appear to be a very good bet.

Snapchat offers what? Engagement

So how do you monetize that? Get users to engage with brands

Allow me to elaborate. Twitter's Amplify partnership program is a brilliant example of the amount brands are willing to pay to engage with customers (both existing and potential). Twitter used to be in a unique position to offer that engagement too: with huge penetration, easy integration into existing media (putting a hashtag in the corner of a TV broadcast, for instance), and an incredibly low-friction engagement process. Twitter made it easy for a brand to create a sea of voices engaging with a brand. I believe Snapchat is now in a position to make a similar offer.

Before I go on, I'd like to pose a question: how many people read event-centric tweets after an event? Aside from journalists reporting on said event looking for memorable tweets, my guess is not many. Hell, most people barely pay attention to the stream during these events. At most, you have a tweet that's at the top of a feed for a few seconds before being quickly pushed down by a dozen more, never to be read again. I'm sure by now you're connecting the dots: Snapchat offers a similar service in that respect.

The thing is, there's a major core difference between these two. Twitter is a public forum, and Snapchat is strictly peer-to-peer communication. This gives Snapchat a unique offering, in that it allows brands to communicate one-on-one with customers.

Imagine, if you will, a broadcast of The Walking Dead (I use them as an example for two reasons: 1.) I'm a huge fan, and 2.) They're big on the second-screen experience so this seems plausible). As part of your second-screen experience, one might find a stream of picture responses to various moments in the episode. Major character dies, suddenly the stream is full of shocked faces (maybe some rage faces or big goofy grins, depending on who). Now imagine this stream is powered by Snapchat.

This is already possible with Twitter, to a degree, but with Snapchat there's less inhibition which will drive greater participation and greater engagement. Not only that, but Snapchat would also allow TWD to engage back with the user on a personal level- maybe respond with a snap that contains a marketing call-to-action ("Want more scares? Check out the exclusive behind-the-scenes footage online"), or just responds with a zombified version of the image you sent in (how cool would that be?).

I'm sure there are many more awesome use cases than what I just stated, but I think this example speaks to the fact that Snapchat can be a real force for engagement without requiring brands to spam the hell out of the platform's users. This is where Snapchat outperforms against any other social product when it comes to driving brand engagement: because the users are so fanatically engaging with the product already, brands don't need to spam. They can just interact with the users in a meaningful or entertaining way - and I don't mean this "Get a coupon that you have 10 seconds to screenshot" bullshit, or "Let brands send snapchats that last forever" or any shit like that. Just give the users a fun way to interact with your brand, and the loyalty (and purchases) will come.

So, here's what I would do, if I were to monetize Snapchat:

- $20/yr developer program

- Free API access for up to 2,000 snaps sent/received per month

- Pay-as-you-go model: $XX for every additional 10,000 additional snaps

- Hashtag support (maybe)

- Analytics

- Offer consulting at a premium to help brands effectively leverage Snapchat

Notice the generous pricing structure. I think one thing that Snapchat can cash in on is the uniqueness of its platform, and the eagerness of the hacker community at large to build on top of it. I want you to recall the modest success of App.net, which doesn't have nearly the engagement metrics or penetration that Snapchat currently enjoys. I for one have several small projects I'd like to build on the Snapchat platform, and would be more than happy to pay a modest premium for the opportunity. The pay-as-you-go structure keeps your hackers happy (I doubt anyone would pay $100+ for toy projects), and also maximizes revenue from larger brand campaigns.

In conclusion, I think the assertion that Snapchat "has no intrinsic value" is complete bollocks.