I've been using Snapchat for around 3 years. It's probably the only purely social network I regularly use anymore, which is a testament to its staying power.
That being said, I've noticed numerous changes over the past half year or so that have lessened my tendency to use it. There are ads everywhere - on the Stories page, inside stories, on filters, and so forth. Performance gets worse with almost every release, which would be understandable were it not for the fact that the end user product has remained functionally identical for the last year or so. The new "Memories" feature, which I've never bothered to enable, feels like a Twitter-like step back from the original Snapchat model (transient, temporary photos).
It'll be interesting to see how Snapchat reconciles this massive IPO with its users interests. As an end user, I don't feel particularly optimistic.
It's all the same. Facebook, Twitter, Instagram, Snapchat. People want a free way to broadcast to their friends. Someone invents a service that does that. Slowly ads take over. Now the stream needs to be "curated". It's no longer a timeline. It's no longer sensible. Now you can no longer reliably broadcast to your friends. People search for a new service that did what the old service used to do. They don't even realize that's what they are doing, but that's what they are doing. I've done this myself now what, a half dozen times? Every 2 years you have to do it again.
It's the same damn model. It's all the same thing. Sometimes I feel like I'm taking crazy pills. Does no one see this?
Snapchat will rule until he ads take over. Your stories will slowly be interrupted by ads. Then your stories will fall out of time sync and you'll only get some updates or a "Featured Updates" or some other features that's really just a way to prioritize and guarantee ad delivery. And while this is happening someone will put out something new, that essentially does what Snapchat originally did in a slightly different format. Maybe square instead of portrait or GIF or Live Photo or whatever. But it's all the same thing. This game will continue forever.
All people want is a way to broadcast into a stream of content, and view other people's content in a timeline. That's it. It works for a while until you get too big. Then you can't pay for it and you have to start inject ads and resorting the timeline until it's no longer a timeline or it's a timeline full of all this stuff no one ever wanted or asked for.
When I was 15 I'd get home from school and run to my computer to check my favorite message board. I'd hit "New Posts" and see all the content from my friends. Cool new video game discussion, new video card benchmarks, some photos someone uploaded, some rant. Honestly, nothing has really changed in 15 years except the format of the content has been continuously updated to be technically (and culturally) relevant. But a post is still a post.
I've noticed the same trend as well, and I think you're right that it's just a cyclical thing. There should be a comparable "eternal september" phrase for social networks.
It's like there is a never ending "go west young man" for internet enabled communication platforms.
Snapchat's ads aren't so bad fortunately. I don't like seeing in between my friends story, but I really liked seeing them in the city stories. It is kind of sad living in a place without a city story, its feel like a censorship bubble where people don't even know what they are missing. Sorry San Francisco, city story is life.
I would argue that Snapchat's ephemeral nature is quite a bit different than Facebook/Twitter/Instagram (it also makes it easier and cheaper to scale). Snapchat is similar to TV in a lot of ways and is going down a similar brand based advertising path.
We also get that they are shooting themselves in the foot like all social networks before it.
If they want to IPO and buy data centers and acquire a bunch of other burgeoning social networks while creating new features in the core product in a desperate attempt to "increase engagement" driving people away faster, then thats the exact route they are going on and we've seen this story already.
From a consumer perspective, I and others hope they find a way to buck the trend. The real answer for them, and all these companies, is that they don't really need their engineers, designers and product team anymore. In the mean time, consumers will have to put up with the inevitable bloatware.
Only on a superficial level. How often do you really find yourself looking up your friends' five year old Facebook posts? On Twitter, the UI actively fights back even when you want to look at old tweets. Anything that drops off of the front page of the timeline is as good as gone, Snapchat just formalizes it.
And for what it's worth, TV is becoming less and less TV-like every day, now that we have Netflix and on-demand everything.
I agree as far as likes, status updates and so on go. For photos though, especially profile pictures, Facebook serves as a timeline of somebody's life. I've been going to school with young people lately and I'm blown away that their profile picture album can trace back to childhood.
It's freaky, I'm grateful to have been able to slide through my youth without public photographic evidence.
I don't use Facebook, but I frequently look back at old Instagram posts. Before Snapchat every photo service let you look at old photos (and indeed, that was half the point!).
> Performance gets worse with almost every release
This is so true. I don't know how they do it, but it feels as though they're running an experiment (like Segment's[1]) to see when people will stop using the app. It baffles me that I can go from seeing the badged icon (i.e. Snapchat knows that I have a message waiting) to a five-second loading screen for the Snap-taking screen to a three-second loading screen for my recent snaps (with no indicator of the message that I received) to a five-plus-second loading screen for the snap to actually play/show. To make matters worse, that's on wifi.
my Samsung Galaxy Note 4 has taken to crashing the phone so hard when I try to load Snapchat (and this is the only app that does it) that holding the power button down for a minute has no effect. To restart the phone I need to have usb power into it.
Why Snapchat? and why only when loading my friends stories, which is the only reason I would open it.
-Using VC money, make something. Hopefully this thing goes 'viral' or really scratches an itch everyone has. Doesn't matter what it is, really.
-If you manage to have a thing people want, monopolize it. Become the only company in that sector, or at least have only 1-3 real competitors. Do whatever it takes to be that monopoly. This is an ugly process.
-Now that you are king, slowly turn down the thumb screws. Progressively add in Ads, make a premium version that is paid and then reduce the free version to squat, sell the user data, etc. Whatever it takes to make the VCs happy. This is the real trick though, and the CEO that does this is mostly a different beast than the guy that made the monopoly. You HAVE to do it, but you can't do it too fast, otherwise the users bolt. It's a real balancing act and is mostly just luck.
This is where snapchat is at now, maybe the early part of this. They have the 'cool' and the monopoly (mostly), now they gotta turn up the water's temperature.
Yes, you've just described economically unproductive enterprises, i.e. those who offer a service or product that nobody would consciously pay for at a market rate if faced with the prospect of doing so. Another way to describe these are pyramid schemes, since they require ever-greater investment (like an IPO) in order to subsidize a product nobody deeply values. If your business model relies on the consumer believing that the product is free, then clearly the consumer doesn't value your product.
I think that's certainly arguable, at least for social network start-ups.
Snapchat may currently be walking the same road as the rest, but it's not too late quite yet for them, IMO. They've added ads, but there are definitely other revenue streams they can look into (see further down the comment tree for one random one). That being said, it's a tough sell. Ads are easy money, especially when your customer base is in that golden range of 14 to mid-30s. It'll be interesting to see whether they can resist the quick cash-out and protect the interests of users (like myself, anyways).
I'm with you on performance (although it crashes less often, it's gotten a lot slower and buggier). However, do you really feel like the ads are everywhere? Or even intrusive? One of the biggest user advantages Snapchat has is that the ads are so easy to tap through. It puts the onus on the advertiser to entice me to watch. Do sponsored filters really bother you that much? Maybe I'm just much weirder than I realized, but I honestly barely even notice the ads. I just treat them like a story I'm not interested in and tap through, or watch the trailer (this seems like the most natural fit on Snapchat, ad wise, anyway).
Memories seems like a poor implementation of a good idea. I get why they decided to default to saving everything to Memories, but they didn't think through the discovery aspect of it, or make it easy to remove memories (who hasn't sent a snap they'd rather forget). Also, the single most irritating part of Memories is that saving to it doesn't default to downloading it. My assumption is they want to control the content, but how did someone not point out that all the stuff you can do with Snapchat in terms of ad hoc photo editing isn't necessarily well known to people who don't already use the app?
That said, I'm pretty bullish on Snapchat, but they should be careful to learn the lessons of Twitter regarding timing. They need to be confident that their user base, engagement, and revenue per user will grow fairly reliably without needing to continually bolt on new crap. I've been impressed with the company, product wise (memories excluded), and would probably treat an IPO like I did Facebook's (observe, and if there's a crash early on, snap up a few shares for the sake of having skin in the game, otherwise just enjoy watching it grow).
I think the ads on stories are certainly intrusive. It's one thing to have sponsored filters (I personally try to avoid sending them), but I find it very jarring when an (often significantly louder and brighter) advertisement interrupts a friend's carefully curated story.
I'm probably being too harsh on Snapchat. They're under a lot of pressure to monetize their platform and, by most measures, they've done a great job integrating that need with a minimum of user disruption. I don't even remember when sponsored filters appeared for the first time, which is a testament to how seamless that introduction was.
I appreciate that they still allow users to tap through advertisements, but part of me wonders if that's a stop-gap towards a future marketing move ("pay 25% more, and users can't stop your ads!"). I hope I'm just being pessimistic, but that's why a slightly more misanthropic me would do in their position.
They're definitely in a very strong position currently, and I too am impressed with the company (I think that their Spectacles move is brave and forward-thinking in all the right ways). If I was an investor, I'd be feeling pretty excited right about now.
I recently switched to my old 5C after breaking my newer phone and it's totally unusable. It takes a good 10+ seconds to be able to take a picture. Swiping to any of the side interfaces takes several seconds. Opening a snap is also atrociously slow.
I wonder where testing and QA measures fall short on these massively popular applications such that they become slow and bloated over time. Is it the case of management seeing actual metrics and not caring? Or does it become harder and harder to find such issues due to increasing legacy device/library/code support (even for companies like Snapchat and Facebook!)?
It's easy to hate because it comes off as one of those cheesy social media apps. Other than Facebook, I'd say it's the most engaging social app that I've ever used. They really nailed it with quality content and addicting/time consuming features (e.g. the face effects).
I certainly don't hate Snapchat, and I definitely agree that it's extremely engaging - that fact, if nothing else, has kept me on it for so long.
In my unsolicited opinion, Snapchat would do well to look into monetizing the celebrities/organizations that use their service. Anecdotally, the Snapchats of DJ Khaled, Arnold Schwarzenegger, etc are (were?) extremely popular among my friends. It might not be popular at first, but charging high profile individuals/organizations for their special status (in addition to the news feed they've added) might be a way to open up a new revenue stream beyond the standard "blast the users with more advertisements".
You're right. That was a strange way to phrase it, on my part.
To give you some background, I'm a 20 year old college student. By the time I was in middle school, Facebook was the hot thing for a 7th grader to have (I remember debating over MySpace versus Facebook). By my junior year of high school, it was Twitter. During my first year of college, it was YikYak.
Over the last few years I've shed most of those social networks, either by deleting the apps for them or by disabling accounts entirely. This isn't a unique experience, at least in my immediate circle of friends and peers. Snapchat is now the hot thing, and has been for a few years now.
People (not just techies!) talk about deactivating their Facebook accounts, or abandoning Twitter. I haven't even heard whispers of a similar movement with respect to Snapchat. That, to me, is a testament to the strength of its core model. What remains, then, is how we'll they'll actually hold on to that model.
Keep in mind that Snapchat is a newcomer relative to FB and Twitter. Its "staying power" has yet to be demonstrated. When a new and shiny social network pops up and starts to compete with the big boys, then we'll see if Snapchat is truly here to stay.
I'd argue that the most resilient social network ever created is without a doubt Facebook. I personally still use it for general news and to keep up to date with what my family and friends are doing.
A level of $25 billion or more would also represent a significant premium to Snap’s most recent valuation, which was pegged at $17.8 billion in its last funding round in May. That would bode well for a new-issue market that until recently suffered from reluctance on the part of public investors to match the private valuations of many Silicon Valley startups.
I honestly wonder how they come up with these numbers.
Normally it's based on (roughly) multiples of revenue, future earnings, etc. Their revenue this year was estimated to be like 370 million.
Let's compare that to recent IPO darling Nutanix. Nutanix had revenue of approximately $241 million and was valued at north of 2 billion. So that's approximately 10 dollars of worth for every dollar of revenue. If you were to use the same ratio, then it would be suggested that snapchat's valuation is approximately 3.7 billion dollars.
There are also LOTS of factors such as is the company profitable, what do their margins look like, what does future growth look like (as often share price is also dependent on growth expectations), etc. My understanding is they were anticipating just shy of a billion in revenue in 2017 (which is ~ 300% growth (which is pretty remarkable at this size). Anyways, that's how some of these numbers come to be.
(edit: spelling)
Cherry-picking isn't that hard. Plus, when DHH wrote that post, Facebook was a totally different company. They only really started justifying their valuation in 2013, after they got lucky with how mobile advertising worked to their advantage.
I don't need to cherry pick because DHH only wrote about 1 company. Also, given that fb is now worth $370B, you could have invested in all four companies and still made a lot of money, which is basically how venture works. You don't expect to make money on most deals, just the occasional amazing one.
Groupon, Twitter (Zuck: "they drove a clown car into a gold mine and fell in"), and Zynga also got lucky quite a bit, and then suddenly they weren't getting lucky very much at all.
As for making money in venture, most venture funds lose money, so it clearly doesn't work that well for most investors. As an asset class, VC has failed to consistently deliver returns. Of course, the bottom 95% doesn't get plastered on magazine covers or fêted by the Twitterati, so most people don't know about them.
Of course, this is all wonderful for the consumers - we get VC-subsidized rides and meals. It's just not that great of a deal for the LPs.
Again, if you had invested in the three companies that he calls out in that post (on the day he posted), you would have made good money. If you shorted the companies he was calling out, you would have lost big. So there is indeed signal in the noise :)
Also, I agree that most venture funds, like most startups, are poor investments. If you can't tell which are which, you're going to lose money.
Sure, diversification is fundamental to modern portfolio theory, and the long run returns for a diversified fund tend to be positive. And the stock pickers who outperform aren't necessarily anything more than statistical outliers (http://longbets.org/362/). Just because the eventual outcomes diverge doesn't mean that there must have been a discernable signal in the noise indicating that.
Given how many top venture funds simply invest partners' and partners' friends' capital at this point, most institutional LPs would be best off avoiding venture. The same goes for quant funds - Renaissance Technologies' Medallion Fund has only contained prop money for years.
If I compare that to a total market index (say, Vanguard's VTI) over a few years, it honestly doesn't look explosive or anything. Why not just invest in the total market (giving no preference for the valley), and be done with it?
Really, who the hell cares about volatility, when it's your retirement at stake /s
Really though, [anything that loses half it's market cap](http://www.reuters.com/article/linkedin-results-research-idU...) in a span of a day should not be in your retirement portfolio, and lets face it, most of these 'growth' oriented startups that go IPO, are susceptible to those losses.
EDIT: Just to clarify. When I say growth oriented, I mean the companies that burn through money to get as many users as possible, without a clear monetization strategy(other than, we'll sell ads).
Every company that you listed produces a product other than Ad Space / eyeballs. Even Facebook has diversified to sell something other than ads -- I still probably wouldn't invest, as their continued success relies on such an ephemeral foundation -- millions of people continuing to log on to Facebook every day. Smart money says that when I am 70 years old, people will not be logging into Facebook every day. If they are, great for Facebook! However you would not catch me betting my retirement money on that. Have you ever walked in to Facebook? How the hell are they going to pay all of those engineers when people stop caring about Facebook and the ad money stops flowing? Same goes for Linkedin -- unless they can make a very strong play into the recruiting space I would not bet my retirement money on their continued success. Based on what I know about recruiting I doubt that Linkedin will be able to penetrate -- if you want to be a personnel supplier for a Kaiser or a Chase Bank you need deep personal connections, you need to wine and dine, you need to go golfing. They aren't amenable to the speed dating model the internet encourages. They want a man or woman they can trust who can demonstrate their value transparently. But I digress.
Snapchat sells ad space. That, to me, is not a sustainable business model. Ask traditional publishers how that model worked when the took it to the web. Won't work (in the long run) for Snapchat either. I think it's an entirely different class of business than AMD, Sun, Tesla, etc.
> Every company that you listed produces a product other than Ad Space / eyeballs. Even Facebook has diversified to sell something other than ads
That's an exaggeration to put it mildly. Facebook is getting nearly all of their $22+ billion in sales from ads. They have practically no revenue diversification. Google is the same. So there's nearly a trillion dollars in market cap courtesy of ads.
Plenty of companies that sell "real products" or that you can walk into have come into trouble (have you tried walking into a Circuit City lately?).
The answer is to have a well diversified portfolio so that you can capture the value of giants like Facebook and still not tie yourself to their long term prospects.
I have a side-project that makes getting a Solo 401k much easier. If anyones interested, PM me and I'll give you an at-cost price. I just want beta users at the moment. All plans are IRS approved, btw.
Given what is happening with Twitter I wonder if people will become more skeptical of these valuations. It is not that Twitter or Snapchat is a bad business. It just isn't that valuable.
>Given what is happening with Twitter I wonder if people will become more skeptical of these valuations.
It's not the outcome of Twitter that will determine it... it's the upcoming S-1 filing[1] that would finally disclose their financial details. If it shows that Snapchat is printing money instead of losing it, the stock will be hot. However, if the Snapchat's S-1 shows they're losing money like Twitter did (2013) and Groupon (2011), then they have to hope on getting their desired IPO price based on hype instead of the underlying financials.
That S-1 is going to be scrutinized by everybody. It will have user counts, revenue, costs, etc. And it won't just be the potential investors analyzing it. I'm sure Larry Page, Mark Zuckerberg, and the CEOs of Chinese internet companies (TenCent, Alibaba), etc will get to know those Snapchat numbers by heart as well. Every venture capitalist in the internet & mobile sectors will also memorize those S-1 numbers. It's going to be a feeding frenzy.
>It is not that Twitter or Snapchat is a bad business.
Twitter is a good product but a bad business. People like it for the utility but it doesn't make any money. The Snapchat S-1 may reveal that it's both a good product and a spectacular business. Everybody has been salivating for those numbers since nothing new has been uncovered since the 2014 leak.[2]
Facebook was valued at $104b when it had an IPO and there was similar shock at valuation. It's now worth $370b because they were able to monetize mobile better than anyone else. Snapchat might fizzle out, or it might be able to successfully pull off mobile branding advertising (opposed to the social targeted advertising that Facebook owns). If so, watch out.
FB FCF is roughly 6B their cap is 370B. That is 60x of FCF. Most companies aren't that extreme. If there was a slow down in Growth their fall would be much larger then a more mature company because a majority of their valuation is based on growth.
There is no denying FB is priced for growth, but it's growing like crazy while the rich valuation is coming down. Your $6B FCF figure is from last year and they are blowing that out of the water so far this year (+60% in the first 2 quarters). It's not fair to use today's stock price with last year's cash flow and decide that it's extreme.
I have huge respect for Evan Spiegel. So many others, like the Instagram and Whatsapp guys took Facebook's money and folded but Spiegel went for it creating one of the rare new successful independent social networks. Bravo.
If you want analytics you have to rely on a 3rd party provider who somehow gets the information by logging into your account. I guess if you're a key account they will send you some data and maybe even some nice visualizations.
I did some research and people really track their audience with spread sheets. Influencers send screenshots of their accounts to advertisment companies to prove how many followers they have. Seriously..
If they want to monetarize their platform they should open at least part of their API.
Facebook IPOd at ~$100B with annual revenue of roughly 4B. Snapchat is estimating 2017 revenue at 500mm-1B so it is not much different than what FB IPOd for. While the comparison of FB and Snapchat may not be the most valid, I still think it is worth noting that the Snapchat valuation isn't exactly unheard of.
I've never seen an IPO underwhelm that much and have it not be a negative overhang. The financials will either support $10b, something more, or something less, in terms of exciting investors. If the financials - growth etc - are underwhelming, institutional investors are not going to magically get excited about the stock just because it comes out at $10 billion. Twitter (among others) has has been a disaster, institutions are going to be skeptical unless the numbers are extremely encouraging.
Everytime I use snapchat I feel bad for the major content generators on the site. It's literally a 18 hour a day job of taking video in every situation they're in. I can't imagine that level of imprisonment.
Snap Inc. is working on an initial public offering that could value the popular virtual-messaging company at $25 billion or more, in what would be one of the highest-profile debuts in years.
The company, formerly known as Snapchat, is preparing the paperwork for an IPO with a view toward selling the shares as early as late March, according to several people familiar with the matter. There’s no guarantee the four-year-old Venice, Calif., company will proceed with a share sale on that time frame or what its valuation might be.
If Snap, best known for allowing users to send disappearing messages from their smartphones, moves forward as planned, it would be the biggest company to go public on a U.S. exchange since 2014. That’s when Chinese e-commerce company Alibaba Group Holding Ltd. debuted at a $168 billion valuation. Snap would become the first of a small group of highly valued and closely watched venture-backed companies, led by Uber Technologies Inc., to test the public markets.
A level of $25 billion or more would also represent a significant premium to Snap’s most recent valuation, which was pegged at $17.8 billion in its last funding round in May. That would bode well for a new-issue market that until recently suffered from reluctance on the part of public investors to match the private valuations of many Silicon Valley startups.
Underpinning Snap’s valuation is the company’s dramatic revenue growth since it first started running advertisements in 2014.
The company told investors earlier this year it expected revenue of between $250 million and $350 million in 2016 and as much as $1 billion in 2017. It is already ahead of the top end of its 2016 forecast, according to two people familiar with the matter.
In 2015, the company generated just $60 million in revenue. It isn’t clear whether Snap is profitable.
Snap primarily makes its money by selling advertisements on Snapchat that are slotted in between stories contributed by media partners and video diaries posted by its 150 million daily active users. Marketers can also purchase location-based or event-based geofilters and “lenses” that add quirky characteristics to photos and video.
Snap’s debut would be a boon to a technology-IPO market that has suffered from a severe drought of new offerings. Only 19 tech companies have gone public this year on U.S. exchanges, raising just $3.3 billion, according to Dealogic. The overall IPO market has been weak too largely because of the dearth of tech offerings.
Yet a spate of IPOs in September among mostly smaller technology companies indicates the trend may be reversing. Firms that priced below their most recent private funding round have quickly soared above it. U.S.-listed tech companies that debuted this year are now up 65% on average as of Wednesday’s close, according to Dealogic.
Nutanix Inc., a software company that had been valued at $2 billion privately, priced its IPO at a valuation of $2.2 billion last week. After more than doubling its IPO price in several days of trading, Nutanix’s valuation is now nearly $5 billion.
A valuation of $25 billion or more would also validate Snap Chief Executive and co-founder Evan Spiegel’s decision in 2013 to spurn a $3 billion cash takeover offer from Facebook Inc.
While executives at some of the largest private companies, including Uber, have said they plan to stay out of the public markets as long as possible, Mr. Spiegel last year said at a conference that the company has a plan for an IPO and wouldn’t field acquisition offers. He hasn’t laid out a time frame.
Snap could use some of the proceeds from an IPO as currency for acquisitions in so-called augmented-reality or virtual-reality, one of the people said. Snap recently changed its name from Snapchat as it moves from the main app for which it is known, which makes virtual messages disappear and is especially popular with teenagers. As part of that transformation, Snap recently said it would release its first hardware product, sunglasses known as Spectacles that are equipped with a wireless video camera.
Snap hasn’t hired any banks as it works on a public filing, known as an S-1, people familiar with the matter said.
Snap’s chief strategy officer, Imran Khan, is part of the team that is working on the filing, these people said. Mr. Khan joined from Credit Suisse Group AG in 2015, where he was head of global internet investment banking and served as a key adviser on the Alibaba IPO, at $25 billion the largest share sale in history.
Snap has raised roughly $2.4 billion in the private markets from a wide range of investors including Benchmark, Lightspeed Venture Partners and Fidelity Investments.
As a SnapChat user, I don't really notice "ads." There are things like stories (which I am guessing are things that they charge money to people to get placement) and promoted filters and overlays you can put on your pictures. But when I am watching a friend's SnapChats, I am never interrupted by advertisements.
I really wonder what is the amount of revenue that they are generating through advertising. Off the top of my head, my recollection is that 95% of the time I open snapchat I do not really see an advertisement. I don't use the discover section, I almost never look at the "stories" and friends very rarely use promoted filters. I wonder how effective ad buyers are finding the SnapChat advertising platform. This is pretty highly contrasted to my recall of Facebook which I see advertisements nearly 100% of the times I open the app. I am a regular user of both apps.
Snapchat is often used for sexting, but certainly not mainly.
Think Twitter for pictures, as a vague comparison. Quickly consumable and disposable updates in picture form. Compare to Instagram, which has a somewhat higher quality expectation because the posts are permanent. There's also an expectation that people will post less frequently, while with Snapchat, it's not unheard of to post a dozen updates in a stretch.
That being said, I've noticed numerous changes over the past half year or so that have lessened my tendency to use it. There are ads everywhere - on the Stories page, inside stories, on filters, and so forth. Performance gets worse with almost every release, which would be understandable were it not for the fact that the end user product has remained functionally identical for the last year or so. The new "Memories" feature, which I've never bothered to enable, feels like a Twitter-like step back from the original Snapchat model (transient, temporary photos).
It'll be interesting to see how Snapchat reconciles this massive IPO with its users interests. As an end user, I don't feel particularly optimistic.