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Snapchat is Intrinsically Worthless

roymurdock.com

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Re: Snapchat is Intrinsically Worthless

#51

Post by ojbyrne »

I think its important to point out that tech blogs always want a breathlessly huge top line number, and that investors play along (The same thing seems to happen with sports contracts). But the details are often vastly more complex and full of earnouts, triggers, board seats, etc, etc. And according to the allthingsd article linked to, the deal hasn't been closed yet:

"Sources said the round being raised — up to $200 million — will come in part from China’s Internet giant Tencent and value the self-destructing mobile messaging startup from $3.6 billion to $4 billion."

Re: Snapchat is Intrinsically Worthless

#52

Post by ubi »

yoloswag wrote: post #26
sp332 wrote: post #2

People are outraged over being spied on, but can't see the value in an private chat tool? Edit I meant private, not anonymous.

My jailbroken iPhone saves every snapchat that I get without notifying the other party. It also makes all snaps viewable for unlimited time and I can even send snaps of pictures in my camera roll to make it seem as if I took the picture in the moment. Look up "Phantom". It's a jailbreak tweak for iOS available in Cydia.

Trust matters.

Re: Snapchat is Intrinsically Worthless

#53

Post by minimax »

roymurdock wrote: post #43
minimax wrote: post #31

Irrespective of present revenue, the acquisition value of Snapchat to Facebook, Google, Yahoo and co basically puts a floor on the valuation. E.g. if I am an investor and I think Google would pay $5B for Snapchat, it makes sense to buy it at $4B. So I guess the trick is not to figure out how much revenue Snapchat will generate on its own, but rather how additional revenue Google could generate if it owned Snapchat (w…

I address this in the article: Snapchat doesn't want to be acquired because it thinks its creating its own new market where it has 100% market share. I agree with you that Snapchat is intrinsically worthless, hence the title of the article. Even if it was eventually acquired, how could the service be augmented to funnel users into a parent company (Google, Facebook) when the very nature of the application is to creat…

Every small, well-funded tech company ever has claimed that they weren't interested in acquisition. I certainly don't think that will keep the M&A folks at the big tech companies from chatting up Snapchat's investors.

For the second part, Google makes billions figuring out how to get ads in front of its users. I'm sure they'd be able to do something for Snapchat.

Re: Snapchat is Intrinsically Worthless

#54

Post by babakian »

What Snapchat has is millions of users who have formed the habit of opening the app every day and using it to communicate, sending 350 million* snaps a day. You can go ahead and make clones of Snapchat (or Facebook or Twitter), but building a clone does not guarantee that you will get the number users that Snapchat (or Facebook or Twitter) have. The investors are betting that the folks at Snapchat will experiment to find ways to extract money from some small subset of Snapchat's users (e.g. let's say Snapchat has 350 million users and they find a way to extract $10 a year from 1% of their users, then that's $35 million a year). This is the bet that the investors of Snapchat are making. It's a risky bet, but they're OK with that. They're used to making risky bets. Most of their bets don't pan out, but the ones that do...well, you're smart, you get the picture.

* This number was taken from the article.

[Edited to fix typos.]

Re: Snapchat is Intrinsically Worthless

#55

Post by roymurdock »

itsprofitbaron wrote: post #29

$4bn for an easily replaceable service that is little more than Microsoft Paint duct taped to a disposable camera? Oh please! Sure you can recreate the app pretty easily which, you can also do for most services (this does not mean scaling to the users they serve) but that is not the value of the service. It's also why 'hackers' typically don't make great investors see: https://news.ycombinator.com/item?id=8863

Haha you caught me. Had to poke a little fun at Snapchat after a long day of writing about such a simple little service :)

Snapchat is firmly entrenched in its spot due to its first-to-move position (see Facebook's failed "Poke" project) but the point is that if it tries to change the service in an annoying manner then there is nothing to stop people from moving to an identical (or better) service that does not annoy them.

Re: Snapchat is Intrinsically Worthless

#56

Post by cylinder »

Imagine a beach. People come to the beach, play, build sand castles they later destroy. It's one beach on a long stretch of coastline. But this particular beach is incredibly popular, where lots of young people go to hang out with each other.

How much would you pay to own that beach? How would you justify that investment -- would you plan to charge an admission fee? Would you wrap the beach in ads and sponsors? Would you charge to build sandcastles? Would you sell concessions?

I think it's helpful to think of SnapChat and many other businesses with this metaphor.

Re: Snapchat is Intrinsically Worthless

#57

Post by roymurdock »

minimax wrote: post #53
roymurdock wrote: post #43

Earlier quoted context omitted.

I address this in the article: Snapchat doesn't want to be acquired because it thinks its creating its own new market where it has 100% market share. I agree with you that Snapchat is intrinsically worthless, hence the title of the article. Even if it was eventually acquired, how could the service be augmented to funnel users into a parent company (Google, Facebook) when the very nature of the application is to creat…

Every small, well-funded tech company ever has claimed that they weren't interested in acquisition. I certainly don't think that will keep the M&A folks at the big tech companies from chatting up Snapchat's investors. For the second part, Google makes billions figuring out how to get ads in front of its users. I'm sure they'd be able to do something for Snapchat.

I agree. If anyone can figure out how to monetize this mess, it's Google.

Or maybe the return on the $4bn investment isn't worth the brain and manpower necessary to wrestle the app into some kind of monetization scheme?

Re: Snapchat is Intrinsically Worthless

#58

Post by yoloswag »

ubi wrote: post #52
yoloswag wrote: post #26

Earlier quoted context omitted.

My jailbroken iPhone saves every snapchat that I get without notifying the other party. It also makes all snaps viewable for unlimited time and I can even send snaps of pictures in my camera roll to make it seem as if I took the picture in the moment. Look up "Phantom". It's a jailbreak tweak for iOS available in Cydia.

Trust matters.

Don't trust the whims of human nature.

Re: Snapchat is Intrinsically Worthless

#59

Post by minimax »

roymurdock wrote: post #57
minimax wrote: post #53

Earlier quoted context omitted.

Every small, well-funded tech company ever has claimed that they weren't interested in acquisition. I certainly don't think that will keep the M&A folks at the big tech companies from chatting up Snapchat's investors. For the second part, Google makes billions figuring out how to get ads in front of its users. I'm sure they'd be able to do something for Snapchat.

I agree. If anyone can figure out how to monetize this mess, it's Google. Or maybe the return on the $4bn investment isn't worth the brain and manpower necessary to wrestle the app into some kind of monetization scheme?

One other thing to consider: Google is sitting on something like $56B (and growing) in cash and short term investments. They could set $4B on fire and it really wouldn't alter their balance sheet significantly. Given its big push into "social" over the past couple of years, I could make the case that it's worth spending some of its cash to try and acquire a bunch of (admittedly fickle) users.

Re: Snapchat is Intrinsically Worthless

#60

Post by FailMore »

I think Snapchat are crazy if they don't put ads in there soon.

I see Snapchat as a faster Youtube. It's basically content that you want to see - Youtube from the masses, Snapchat from your friends.

The Youtube advertising model is clearly fantastic. From things I've read some time in the past I know they kill it on a $/user basis vs pretty much every social site on the web.

Putting a 2 second static 'brand flash' in front of every snap would probably not put people off using the service (in the same way that people still use Youtube - even though video hosting is a highly replicable thing). And from a brands point of view 2 seconds is probably all you need to get into someone's subconscious.

Bonuses for being an app:

1) Full screen take over. 2) No distractions from other tabs. 3) I'm sure they could find out age and sex quite easily if they wanted to. So they would have - age, sex and location. POWERFUL.

The sooner the better. Explain that the app needs to make money to it's users. People get used to things.

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