When a company like Uber is raising insane amounts of money I think to myself - "ok, they're working on vehicle automation and other ambitious projects, it makes sense".
When a company like snapchat is looking for 4B in addition to existing funding I am left completely dumbfounded.
Can someone please explain why they would need this much cash?
The engineering community is sleeping on Snapchat, but shouldn't be.
My life is AR. I'm the CEO for an AR company, I speak write and live and breathe all things AR.
Snapchat is poised to be the most important AR company around for several reasons. 1. They have a MASSIVE userbase that is comfortable with sharing their lives 2. That userbase has already shown an interest in AR - and yes whether you like it or not their filters are on the AR spectrum - the filters system maps, tracks (SLAM) and modifies in real time.
Their Spectacles release has the potential to build the largest real world image dataset on the planet - something needed (for reasons I won't go into) for AR everywhere. Think on the order of 1.8 Billion images per month with depth data from the stereo cameras (30FPS * 10 sec snap * estimated 20 snaps per day * estimate 100k spectacles users in first month).
Most people have no clue what is going on in the AR world, and I can tell you Snapchat is going to be formidable. If they can invest in a VRD, then they could win the whole AR market, but they need to raise more than 4BN to do that probably.
I'm inclined to agree. I was very bearish on Snapchat around the time they rejected the Facebook offer. But more than any other app right now, Snapchat is killing it with users. This is a what a product users love looks like.
On top of that, I've been consistently impressed with their technological prowess, even if the AR component seems somewhat inconsequential to me right now.
You better believe Snapchat is gunning for that top spot in social - that's what the IPO is about. If they're at or surpassed Facebook's level by 2020, I seriously would not be surprised.
I'm bullish too, but any comparisons to Facebook are lazy. Snapchat and Facebook are completely orthogonal (the closer competition is Instagram, owned by FB, and Snapchat, but even then I would argue it is lazy to say they are direct competitors, ignoring the Instagram Stories product).
For better or worse Facebook is a piece of social infrastructure and utility. Everyone has Facebook. All the groups I know of are organized through Facebook. All of the events. And so on.
Completely anecdotal, but my siblings and cousins that are teens don't have Facebook, and most of their classmates don't either. It's weird to imagine a world where not everyone has Facebook, but I don't think it's as ubiquitous for those who grew up where alternatives existed, such as Snapchat and Instagram (even Twitter as well).
As teenagers with close friend circles, that's becoming more common. I wouldn't be surprised to see them pick up and get more involved with Facebook if/when they enter a larger community at college, or move to a new city, etc.
> The most money will go to the app that gets the most viewing.
...and figures out how to draw consistent revenue from that. Snapchat is making $365m this year in revenue, projecting $1b next year, and has a newly launched ads API.
Famous last words. Reminds me of the old adage: "640k of memory is all that anybody with a computer would ever need."
I already know a lot of younger folks that are pumped about the Snapchat glasses...
(I'm not saying you're wrong... I just wouldn't make such steadfast predictions about the future either. But then again, I don't understand SnapChat and am not their target audience.)
Indeed you could. And sometimes you'd be right; other times you'd be dead wrong. If you could be right even half the time, you'd be rich as all get out. Which is why I would suggest: Don't make overreaching bold predictions (or become an investor).
I agree with both of you. The glasses are silly, don't seem that technically complex, and I think they are poised to be a huge hit with Snapchat's base audience. Google Glass was a technically well made device that forgot product, I think those stupid glasses hit their product-market fit quite well. The recording indicator and their 'retro' style are both what I consider to be key components in this assessment.
No, young people will not stand in line to buy or wear those glasses. Snap chat is very popular. However, the current user base will outgrow it and those younger will have something else. Better get that 4B while they can. It doesn't have the roots or staying power of a Facebook or Twitter (I know Twitter isn't making money).
The problem with the Snapchat glasses is their re usability and if it catches on.
If your friends aren't using them and you're the only one with a pair you'd be less inclined to wear them. Everyone thought Google Glass was going to be the future but those glasses made you look like a total douche. Hopefully the Spectacles wont be branded as such.
Those glasses are designed to be the party Polaroid of a generation. The person holding the camera gets the attention of everybody keen on presenting themselves, the bet is that putting the camera on your face intensifies this experience. Expect these things to get passed around a bit when in use, so there will quite some local virality within groups. This is good for immediate sales, but long term usage could suffer hard if market saturation coincides with the novelty wearing off. If there is one Polaroid at a given party, it is the center of attention, if there are three of them, they are all just annoying. The me-too buyers well get quite the opposite result compared to the early adopters.
If Snapchat sets up the glasses business as an additional revenue stream, it could well become a reasonable but limited success, if they set it up "strategically", maybe even selling at loss, I predict terrible failure.
Not sure network effects are necessary there. It's fine if one person makes videos with glasses as long as friends enjoy watching them.
If the glasses are promoted as something you only wear when you want to record video and that you otherwise put away it might take off.
Nobody minds when you pull out a cell phone and record video because it's obvious you're filming. I think it was the omnipresent threat of being secretly recorded that made Glass creepy.
I would posit: your perception of "total douche-ness" (your words, not mine) are largely driven by marketing and/or culture.
Glass definitely failed in the marketing, branding, and roll-out departments (among others) -- but they're no more or less doofy (to me) than many other perfectly-accepted fashions: baggy pants, beats headphones, crocs, etc.
And nobody would carry Palm Pilot PDAs. Well they didn't wind up carrying them from Palm, but Apple and Samsung sure have something awfully close. Snap may or may not be the AR disruptor, but AR will be the new smartphone. Whoever owns it will be the new Apple.
But before Palm Pilots, there was the Newton so loved by techies, just like Glass. So snap may end up the palm pilot or one of the dozen PDA knockoffs that were around (I seem to remember some Microsoft ones too). It seems like concepts float around in several iterations, or as many as it takes, until someone hits the sweet spot.
I'm not really knowledgeable about the "wearable" market, but to me it doesn't seem as ubiquitous as the smart phone.
Those "dumb glasses" are all I hear high school kids talking about when I volunteer. If they hit a cheap enough price point with them, kids are going to wear them everywhere. There'll be plenty of backlash as schools/etc ban them, but they're targeting a market that's already crazy about them.
If they license the technology to premium brands, say Prada, Calvin Klein etc. everyone will buy them. Especially their target group which is primarily youngsters.
Sounds like twitter: interesting, perhaps the future, but not a business worth investment. How can they succeed where twitter failed? The ads have ruined the app. Everyone I know who uses it agrees it performs terribly and is extremely difficult to avoid unwanted, irrelevant ads.
It's a better case than twitter though. There is no obvious way of monetizing twitter, while there are many ways that I can think of that snapchat can monetized. For example, Line and Kakao have massively succeeded with their sticker/character business, and snapchat could bring something similar. There are many other ways I can list. So, the issue is not "What are possible methods of monetization?" but "How do I optimize profit?" This is definitely a more favorable setting than twitter.
Kakao's business model history is actually rather fascinating, and they keep grabbing sizeable market shares in unlikely or previously inexpressive markets to great success.
> In 2012, KakaoTalk's $42 million revenue is broken down to 67.5% ($31.1M) gaming, 26.2% ($12.1M) advertising, and 6.3% ($2.8M) emoticon sales. [1]
"Their Spectacles release has the potential to build the largest real world image dataset on the planet"
With Google (and now Uber) cars driving around numerous places to capture data specifically for map imagery, satellite imagery and Android/iOS phones taking tons of photos + videos I highly doubt Snap will be the one to build the world's largest image dataset. The rest of your argument makes sense though.
With only 100k users they would generate approximately 9BN images per month (30FPS min, 10sec Snaps, average 10 snaps per day).
With 1M users of spectacles (.6% of their current MAU), that's potentially 90BN images per month and over a trillion per year. In the same dataset. Machine vision wet dream.
There is no way the average user is shooting full 10s snaps 10x day. I use Snapchat regularly and that describes the top eschelon of users, which might be Spectacles users, but probably not all of them. I believe that is a vast overestimate.
As with most statistics it's likely normally distributed. I know teens send/receive in the hundreds per day - mind boggling really - and the celeb accounts post dozens daily. Even back in 2013 the numbers were staggering.
That was Twitter's playbook and I thought Twitter wasn't doing so well recently...I'm not saying massive amounts of users isn't valuable, but you still need to play it right.
Twitter loses over USD600MM / yr. The playbook is yet to be proven. If they were earning 2.6B / yr, news articles and market perception would be very, very different.
Twitter is massively profitable. It makes billions in advertising.
(for every $1 twitter make, it spends $2, so their accounting is deep in the negative. But if they fire half the people (who are useless anyway) and stop spending money like madmen, they'll be positive, VERY POSITIVE. thanks to advertising revenues.)
Don't know about Facebook (never been) but I keep hearing about this fabled Google Ad business and honestly, not only I can't recall the last time I even noticed one, needless to say have never even clicked on one. Some interested party wants to keep these surveillance cum social networks afloat and the fairy ad business model and overblown evaluations and VC cash is the front for funding them.
You can't use google much if you haven't noticed the top three results on your searches sometimes being tagged with the word "sponsored". Unless the reason it's showing here, is an European law thing?
I've been using it since pretty much since it came out. In the early days I definitely noticed the ads on the side, but very quickly it pretty much got filtered away in my eyes along with window decorations, etc.
Google and Facebook capture user data across many dimensions, and so are able to present advertisers with highly targeted groups of prospects. I don't know if that's the case with Twitter or Snapchat. I would say that the more a site presents you with ads you have no interest in, the less likely it is that they have fine-grained profiles of their users (which is where the money is).
The way it stands, Snapchat already has more data points to tap from and richer content and interaction opportunities than traditional media (television, radio, print, OOH...), and this could be further improved in future versions. You don't need to set out to compete against Google and Facebook when the actual big fish in the market are in fact easier to position yourself against.
I'm not sure I understand what you mean by the actual big fish in the market. Google's Q2 16 ad revenue was $19.1B, NBC's was $2.1B, CBS's was $1.6B, and ABC's was also $1.6B.
I was thinking verticals as a whole, not individual companies. The budget for TV, print, radio and so forth tells the size of the market, the fact that there are more players in these verticals than in online search is maybe yet another reason to attack them rather than Google.
I'm not so sure. Even with their rudimentary pre-AR camera filters, some were pretty popular and successful [1]. The Gatorade dunk filter generated 160 million impressions and the company was very pleased [2] -- and people seemed to like it.
The filters are also interesting because they involve user choice: the ads are not unsolicited; rather, they are picked by the users. That's pretty interesting.
We've had in-game advertising in video games for a while; certain games that mimic realistic urban environments lend themselves well to this. In some settings, AR could include a density of advertising -- passive or interactive -- similar to the real world without much trouble. In fact, an AR setting devoid of any commercial presence may be unsettling on its own.
>In some settings, AR could include a density of advertising -- passive or interactive -- similar to the real world without much trouble.
Occasionally I'll watch an NHL hockey game and on certain broadcasts I started to notice large banners on the glass behind the goals and thought to myself, "Boy, you pay for seats that close to the ice and you're looking at the back of a banner ad?"
When I noticed the ad changed during the broadcast I realized that it was a virtual projection for the TV audience[0] -- a sort of AR in its own right, since it appears so seamless that I originally thought it was part of the rink.
> In some settings, AR could include a density of advertising -- passive or interactive -- similar to the real world without much trouble. In fact, an AR setting devoid of any commercial presence may be unsettling on its own.
I'm going to use it to block IRL advertising, not replace it.
Snap chat inserts sponsored content into your feed. The trick is the content is engaging and heavily tailored to their demographics. Lots of celeb gossip, sports news, random stuff you'd normally see in magazine articles. There's certainly a distinct, high potential business opportunity there.
I sure as hell am tired of all these damned ads. I will pay for a service to avoid myself being the item that is sold. How large is the population of users like me? Probably not very large. Also, privacy minded people seem to have a disdain for social media.
My initial reaction was the same but we already have people walking around wearing or carrying items with corporate branding (sports apparel, well known clothing brands, iPhones etc)
The ad makers are people too, for now. One would assume they would get wise of the stigma of having ads plastered on your face and would try to create commercials in different styles and formats that are more subtle/interesting than the banner ads we're all accustomed to.
There are too many options for monetization in AR to spell out, or to narrow down exactly which ones Snap will utilize, but just assume if you can make money on the web now, you'll be able to make money in AR in a similar way.
My intuition is that these will be a hit. Simple, fun, youthful & on trend, not fussy to charge, huge captive userbase to sell to. Can you turn them around and use the mirrored lenses to take a selfie?
Snap probably has a winner here if their users will further embrace the idea of turning cameras away from their faces and onto their friends and experiences. How big an "if" that is, I can't yet say.
I think they're too trendy looking. They'll be fine for a season/uni semester, but after that will drop out of fashion. And they'll be too pricey for their core demographic to keep buying new ones.
Snapchat already makes like 700 million in revenue. (edit: jk they hope to make 300 million and then hope to do much more than that by 2017)
The real question is "do all these companies buying ads actually make a return on investment" and the answer is DOESN'T MATTER! Lots of ad dollars still to move away from older methods into digital media lol
Maybe there will be a Netflix documentary in the year 2027 about what caused the burst of the collateralized ad market and financial crises of the roaring 20s, with the undertone of "why didn't anybody see this coming"
I mostly agree with you, but you're off by about an order of magnitude (±0.5) on Snap's revenue numbers. They did about $60 million in 2015, and were projecting 4x that for this year.
Is the reason AR benefits from billions of photos of the real world a secret, or is there something you can point to to read about that? I'm intrigued :)
Also, you probably know better than me, but to me it looks like the beauty filters are the ones that have really stuck for Snapchat. If I'm right and their users only really care about filters that make them look better, does that affect your outlook at all regarding their users showing an interest in AR?
The simple answer is that you can make very large 3D maps with those images.
I disagree with your second assumption, though I can see where it comes from. It's not so much the specific implementation, beauty or whimsy, but rather that people will take the action of modifying their real time view consistently.
Andrew I think you're too optimistic about spectacles given no one has even proven it's a viable market, let alone that Snapchat will have a successful implementation.
What's your best guess of how many pair will sell through to actual customers?
They are not the only player, but they probably have the most accepting user base. They don't have the largest user base amongst the AR players though.
*they don't have the larger user base amongst AR players though"
Yes they do, by far. The next biggest pure AR player (by mau) is arguably blippar with about 8M. Metaio had a larger install base across all products, but they are gone.
I guess if you count Google translate they would eclipse test in their but I don't know how many people are using word view translate implementation.
I don't consider Pokemon go a pure AR play and even then their at numbers are hard to come by as a significant population used it without AR
You appear to be right. For some reason I thought I saw a stereo version. Missed opportunity there in that case. I still stand by my assertion though - as you don't need stereo for depth but it does make it faster and more robustly recovered.
I used to love Snapchat, it felt like the future of communication in many ways. Unfortunately it seems that their Android app became completely unusable on mid-tier devices in the past year. Painfully slow UX and unreliable in most situations. Wish they'd do something about this as it forced me to abandon the platform entirely.
Their spectacles is going to be a game changer. I hope it does well (buy also part of me hopes it does not for the sake of everyone's privacy in public).
No, they are not. It's gonna be another gimmick lifestyle tech product that gets trumped up in the press and then no one cares about. They are glasses that only take ten seconds video and can only post it to snapchat. And they cost $130. Come on.
Lol people post this everytime someone critiques a hyped up new bullshit tech product. Guess what, the vast majority of them fail. Spectacles is not the iPod. It's going to flop, I stand by it.
Your analysis that it is a "gimmick", "bullshit", and "hyped up" is over-simplified and, I think, wrong. There's no need to swear or be mean about this. Some people, myself included (I hate hate hate hate the snapchat app, I'm not able to use it and I can't stand the idea of it) think that Snap does understand product and its market, and has incredible visions for the future with an ability to execute. I think that Snap will be a huge success for a long time to come.
Naysaying Snap is fine, but not if your argument is "bullshit hype".
Did not stop Gopro. If you have been to a ski resort in recent years you have probably noticed that at some point, Gopro saturation started to become inversely proportional to riding skill. Where Gopros are sold with the promise of being like those who get really fast and have spectacularly high jumps, Snapchat specs will be sold with the promise of being like those who get really drunk and have spectacularly great parties. That is a very promising market to tap into, but no way that it could ever be a four billion market.
There are important differences between GoPros and Spectacles, though.
GoPros are a convenient, high-quality, expandable memory camera that creates a regular video file as big as the storage space available that you can use however you want.
Spectacles are a convenient, unknown quality camera creating a ten-second video that requires smartphone interaction, is designed to be on your face, and is tied to one specific (albeit popular) platform.
Aside from both being able to take video and being easy enough to carry around, the products and the target markets don't intersect perfectly, so it's hard to predict one's success from the other.
I base my comparison on the observation that both are purpose built for capturing a very specific kind of experience that few have, but many think they should have (but never will).
This is certainly no predictor of absolute success, just an element of understanding the potential market.
I really dislike the asymmetry between the ability to take pictures of anyone in public easily (assuming spectacles or an equivalent comes out), with low chance of detection (unlike cameras/phones, which are harder to disguise) while being unable to as easily wear a mask in public to preserve some semblance of anonymity. Anti-mask laws exist for a variety of reasons, some of which I am fine with (e.g near banks) and some of which I am not (e.g abuse to shut down things like the Occupy movement). I would like to see a similar treatment of devices like this (spectacles, google glass, or whatever other product people work on in this space).
They should be treated on par with hidden cameras and the like. Until legislation takes care of this, I am not happy with the situation.
Snapchat spectacles are specifically designed to transfer the "everybody smile for the camera" effect to the wearer. The absolute opposite of a disguised camera.
Hidden cameras (not terribly well hidden cameras, but hidden nonetheless) are nothing new, the Snapchat innovation is to reverse the camouflage to create completely different usage patterns.
If the Snapchat specs become popular there will actually be a knockoff market for fakes that don't even have a camera, because imitating just the recording status lights will be enough to get the "say cheese" effect.
Google Glass was meant to be worn all the time, people were wearing them to the bar and stuff. Spectacles are pretty easy to put in your pocket. For the most part kids will be wearing Spectacles in situations where they would otherwise be walking around with a camera in their hand, ready to shoot stuff.
And I bet we'll be seeing our first Spectacles-based-sex-tape scandal within a year, once someone figures out how to short-circuit the indicator light. ;)
Can you elaborate a bit on how they use SLAM? I was my (mis?)understanding that SLAM required a pre-existing map. If this is true what are the source of the maps? Are the maps built from previous users's snaps?
But don't you think that because AR is just starting to have a place in our mobile phones it is open to a lot of newcomers? This is not a mature market sector like social networks, ads, or search.
Yes, but a narrower interpretation than used in more robust systems like those that we built. They don't need an entire SLAM system with loop closure and relocalization because you can mimic those with the simple facial recognition portions. However they added orientation functionality but without visual odometry. Functionally it works the same, and is the easiest way to describe it.
Not in the robotics sense where you map out a hallway of a building or something. But it does map facial landmarks very well (and I suppose that will also give you localization relative to the face).
They have captured an important segment of the market (12-2x years olds). I also think that people In this age group find it a ton more engaging than the alternatives.
FB really made it when the captured the old people. The issue is the the 12-20 years are quite mercurial. 15 years ago it was AIM,MSN, Yahoo chat, then myspace, then facebook. Now its snap chat and instagram. Its hard to keep the market since when you get friend request from Mom or Dad do you really want to be in that social network anymore?
I don't think 12-20 year olds are that mercurial, it's just a small age range, so in 8 years it will be an entirely new group of people. Fifteen years is nearly two full lengths of that duration, so it's no wonder that AIM/MSN/Yahoo aren't in use by the current 12-20 year olds. It's only very recently that I (a 29 year old) finally phased out AIM in favor of other channels. Once you capture a social group, it's fairly stable, there's just a constant stream of new social groups as each year's new 12-20 year olds start going online.
The 12-20 demographic is mercurial, but 12-20 year olds are not.
Though really my point was this: it isn't the case that you need to continually re-grab the same users, it is the case that there are continually new users to grab.
> The issue is the the 12-20 years are quite mercurial.
I don't think we are mercurial but that we have less experience and therefore are much more willing to try new things. Snapchat is way better as an outlet to post more regular things you are doing to your friends because it is ephemeral.
Why? Because we all look back and see all the stupid stuff we posted when we were younger. The only reason I haven't deleted my facebook to delete all of that old stuff is because Facebook's other offerings are pretty good. While I hardly know anyone that posts regularly to facebook anymore, almost everyone uses facebook messenger and groups to communicate in isolated groups.
Snapchat has been blowing up because it fills that niche of "I want to post more updates about my life without really having to worry about how those updates will be interpreted in the future".
Have you never made a joke before that some random person might not like and get offended by it and try and attack you for it? Have you never said something that you have looked back upon and regretted saying it (whether you were just young and immature or just not thinking clearly)?
Do you also not do those things over common communication channels outside of talking face to face?
I'm genuinely curious because I literally don't know anyone under 30 that has never done anything that they did not want recorded in history forever.
It's not that I have posted anything on facebook/instagram/snapchat... that is really that bad/embarrassing. If it were all posted on the front page of the NYT I would probably go through life just as normally (albeit, quite a bit embarrassed by it). I would just prefer to minimize that risk.
That's where snapchat fills the niche. It allows me to speak more freely with others with less fear that everything I say and do will be pulled up years later completely out of context.
1) They're losing a ton of money. They barely have any revenue, and have over 1,000 employees, many of which are high paid engineers. They also have large technical overhead costs. My guess is they want to sock away 3-4 years of cash since they don't want to go back to the market too often.
2) M&A. Perhaps they buy some technology companies. Or Twitter? Or who knows?
3) They may be cashing out certain earlier investors.
When companies IPO, they have to release a significant amount of equity no matter what.
Considering Snapchat revealed Spectacles, which in my mind was an unexpected hardware development, they could use funding for side projects and expansion. Hopefully, they don't become like Twitter and waste all that money for so little gain.
I'm pretty sure that they will write these off evetually. To me they feel very similar to Google glass insofar the customer bases being somewhat similar, maybe spectacles' being somewhat younger.
Google Glass and Spectacles are not even close to the same customer base. Google glass was a luxury beta product for techies with lots of disposable income. Spectacles are targeted towards 15-25yr olds. Google Glass users wanted to use the "future" of technology where as spectacles users want to Snap and share more.
I'm surprised their hasn't been nearly the same adverse reaction to spectacles as there was to glass. Maybe we haven't seen it yet as they haven't been released, but people hated the potential of Google Glass sharing pictures and videos of people without them knowing. Maybe we've changed as a culture enough in these few years.
Good observations. The difference with Spectacles is playfulness and fun: kids goofing off for the camera on a beach vs normcore cyborg narrating on a bluetooth headset.
A potential weakness of Spectacles as a product is that it augments only non-selfie, "extraverted" photography. So it doesn't engage the selfie obsessed side of the userbase as much as the phone-based AR filters do.
I haven't been a fan of Snapchat, but now I'm curious to see how users react to this product.
But do the majority of 15 - 25 Snapchat users have $130 to spend on these? I'm asking because I don't know. Also sunglasses seem to get forgotten/lost somewhat regularly no?
Designer sunglasses can easily cost more than $130 and some 15-25 year old people do find the money to spend on them.
So the real question is more has Snapchat and its functionality built enough of a cachet to be valued as highly as something like a Ray Ban.
I do wonder about whether people will find the video-recording-and-sharing aspect creepy. It might help a bit that people don't associate Snapchat as "instantly on the web forever" compared to other services. We'll see.
You are right they are quite a bit cheaper but they are just as obtrusive. I think that glasses (esp. dioptric) are fundamentally a part of your identity and I think that most people fundamentally hate associating themselves with a company not to come across as a 'fanboys'. Like wearing the snapchat glasses projects a certain type of persona which I think most people might prefer not to project.
I think that they should be marketed as "cool glasses (that also record video)" as opposed to "video recording glasses". "Video recording glasses" are a gimmick, "cool glasses (that also record video)" could be timeless.
My initial impression upon seeing the spectacles was that they had two cameras. They don't, but the impression points to a key design choice that was, IMHO, fatally absent from Google glass: attempted symmetry.
I think that people will be more likely to wear the spectacles for this reason--they can actually pass for a pair of somewhat ostentatious sunglasses to an unknowing observer because of their near-symmetry, vs. Google glass, the mere shape of which screamed "BORG!"
Building a war chest to purchase the next company or act quickly. You need to have the cash on hand, and that can't happen overnight. They need not spend the money today.
You are right that $4B from an IPO is technically another fundraising round.
However, an IPO is a special case, as for years now a company/its board will consider an IPO as a business strategy decision and not as fundraising per se.
Big shift in the 1980s.
There are some legal/regulatory aspects to an IPO and "liquidity event" type reasons an IPO is treated differently too.
Basically, an IPO brings many pros and cons with it. A company may choose to IPO even when it doesn't need the cash or even want the cash. The money raised is just a byproduct of choosing this particular business strategy.
(An analogy in pre-IPO startups: A startup may take an investment from a famous or influential VC even though the startup doesn't need the money at that point. Rather they look at it as a business decision because the startup really wants some other benefits they can get from having this famous VC as an investor. e.g. mentorship, network connections or even just more legitimacy by association... Lots of VCs provide non-cash benefits but you have to take cash to get them.)
As for how did Snap Inc. get that $4B number. That's complicated and not even an official number. But a simple answer could be if a company's current private valuation is ~$40B and they want to IPO for strategic reasons but only sell off/dilute as little as possible while still looking respectable.
They won't IPO only 1% of the company, too little, 10% is a respectable minimum. 10% of $40B = $4B.
Total speculation and just an example. But hopefully you see you are right to ask questions when these companies IPO as it's full of smoke and mirrors with a different story behind the scenes.
They will use that money to buy other startups. As they have done with the company that have created their glasses 2 years ago, the one that created lens etc.
I have yet to speak with anyone who thinks Snapchat's valuation is realistic and that their business model will sustain them. When I see this I just think of Twitter all over again.
I would love to hear arguments supporting Snapchat though.
This is my takeaway from Kleiner Perkins Caufield & Byers 2016 internet trends presentation. http://www.kpcb.com/internet-trends
Some I agree with, some I think is hyperbole.
Snapchat's Ads are effective. More effective than anything else on the internet or other apps. They are authentic, entertaining, in-context and brief. They follow the 3Vs: Vertical (Made for Mobiles) / Video (Great Way to Tell Story) / Viewing (Always Full Screen).
Snapchat's average monthly use per visitor is way above other social networks for the younger generation. And it is growing incredibly fast.
Advertisers are able to integrate deeply into the app in various unique and interesting ways.
Snap chat is the leader a new wave of advertising, in the way Facebook did a few years ago, and google before that.
You should add a 4th V which is very important to why advertisers are liking SnapChat, which is Volume. SnapChat ads naturally have sound on and users expect it to be that way; another element to its similarities to television advertising.
Yep. First time I saw it, I thought, this is a major alternative to TV. Twitter had the tv hashtag space locked up but now you can do live snapchat along side live programming.
My questions re: "effectiveness" is what can they do beyond brand awareness? Can Snapchat capture advertisers who are more interested in CPC than CPM? Can it drive sales in a meaningful way? Maybe it doesn't matter, as brand awareness advertising is a big money game and somebody has to replace traditional TV (and even magazine) spend.
I do a lot of inbound marketing for B2B companies. I've been thoroughly surprised at the number of clients I see asking for Snapchat marketing, and the number of people in my industry promoting their Snapchat channels aggressively.
For B2B, Facebook is more or less dying. Twitter has too much noise. I'm still trying to figure out how Snapchat fits in here but people are promoting it aggressively at least
I've seen the same (also a marketing guy), but we both know that most companies always chase the shiny new thing regardless of its actual effectiveness. I'm a Snap fan and can't wait to experiment with the ads API at some point, I'm just wondering where its place is come budget analysis time.
I'm not a believer myself—not that I don't find Snapchat compelling, just not necessarily $18-35 billion compelling—but here's my best shot at a devil's advocate argument.
Snapchat is the proverbial 'new MTV' that marketers have been waiting to see appear on the internet for perhaps 20 years. Huge numbers of young people use it daily. Engagement is great, perhaps unlike any other consumer internet product: you watch it the way you watch tv. Just queue up a bunch of stories and stare at it for a while. Advertisers and the brands they represent like this. A lot.
The newly renamed Snap Inc has even greater ambitions. They aim to be the 'new Apple.' A consumer electronics line that achieves more than customer loyalty, something more like emotional commitment. The sort of 'brand identity' that gets written about in textbooks but rarely actually exists in the world. A company that produces functional gadgets that are meant to be flaunted like jewelry.
Is Evan Spiegel the 'new Steve Jobs'? Personally, I doubt it. But there are plenty of wealthy and connected people who seem very invested in that notion becoming reality.
I suppose the argument is that Snapchat has the younger userbase that drifted away from Facebook once everyone and their mother hopped onto the FB bandwagon. With products like Discover, Snapchat is positioning itself as an advertising platform to go up against FB and Google to corner the "hard to find" millennials market.
That being said, I think Snapchat's current valuation is wildly overblown and that they are trying to cash out on an IPO before advertisers realize that the ROI isn't there. Snapchat already has some of the highest CPMs in the market, and their sponsored content is incredibly expensive. I think advertisers wanted to experiment with the platform, but I think the jury's still out if it's worth it. Regardless, if Snapchat can lock in a few high priced deals they can gain some momentum into an IPO, but once they go public, there's going to be much more scrutiny in their metrics. I suspect blowing hundreds of thousands of dollars to woo the fickle, ad-adverse millennial with a filter will ultimately prove ineffective.
I think that part of the reason twitter is doing the way it's doing is the less than stellar user engagement. AFAIK snapchat is killing it on that front. Idk if that justifies the valuation but I do see the general public a lot more pumped about it than I've ever seen people pumped about Twitter (ymmv).
From what I've heard, if you are 13-25 with a smartphone, there's a good chance your primary source of communication is snapchat. And unlike other platforms (WeChat, WhatsApp), snapchat has a content delivery mechanism. So not only do friends connect with friends, but they also connect with businesses, celebrities etc.
Twitter was never about fast communication between two people, no one every said "Let's see if Mike wants to join us for dinner, I'll just Twitter DM him". Whereas WeChat, Viber, Whatsapp allows you to communicate quickly, there's no connection to advertisers (from what I know). Therefore snapchat is valued so highly because it does what twitter and Whatsapp et al couldn't do.
Your understanding of WeChat is not very accurate. It's on a completely different level of integration with daily life than Facebook, Instagram, Snapchat, or anything else. It doesn't really do ads because companies run their shop on WeChat. It has a payment system, it lets you book and pay for taxis, order lunch, etc. In comparison, Snapchat is hot air.
spoken like someone who hasn't used the product. snapchat's ads fit the format amazingly well, and now that snapchat is also paying for content directly everyone's incentives are aligned to make a deeply engaging product that monetizes well without alienating users.
I have. I'm saying that especially when public, there is no such thing as enough profitability. There's no number of ads that will satisfy shareholder demands. They'll have to squeeze more and more and the only possible signal that "more" has become "too much" is necessarily when users start walking away from the service.
It's not necessarily just ads. There's content. Aston Kutcher in a recent podcast talked about "vertical video" meaning people develop content specifically aimed at mobile users watching on a portrait phone. Snapchat is primed to deliver that content. Saying that there are not enough ads is like saying YouTube was a terrible buy for Google.
As it stands now, you need to actively choose to play an ad, and that's how the impression is made. This is why Snapchat commands a higher CPM, because the user is actively in front of the screen.
However, I never look at the ads and instead stick to my friend's user generated content. Once ads are forced on users, they will jump ship.
Big user base coveted by advertisers. There's also clearly a market for a social network for teenagers separate from Facebook (so kids don't have their parents spying on them).
I wouldn't. Face it, this class of SV "startups" are the new pump-and-dump investment vehicles. They burned $3B in funding to build a chat app, and Prince Bin Talal needs to cash out with 10X return at some point.
I'm surprised (rather, disappointed) that the article doesn't make any comparisons to Facebook's IPO. For today's 14-to-25-year-olds, Snapchat is the new Facebook, in terms of user engagement, market penetration, mindshare -- so it stands to reason in terms of valuation it would be too.
There are some important differences, of course. Facebook owns multiple properties that mount competition to Snap Inc: Instagram, Messenger, Whatsapp, the original Facebook; Snapchat subsumes all these usecases in a single app that you'd be hard-pressed not to find on a teen's phone today. And it does so by making it optional to curate a permanent, indexable, discoverable, idealized public identity.
To many, that's strictly better than anything Facebook has put out -- a company that nonetheless commanded a high valuation, performed an IPO (albeit rocky), and now posts a strong profit.
I disagree in the similarities of Facebook. Snapchat is like twitter but worse. Because it's anonymous and not associated with real names, they don't have an actual relationship graph, unlike twitter they don't have an interest graph. All they really have is your location. Everything is ephemeral so it's going to be even harder to figure out what type of advertising they should actually target. Also we don't know where people spend most of their time in private messages or stories and the only thing they really are focusing on monetizing is stories. Also like Twitter their advertising system can be subverted. Brands and advertisers will go directly to influencers to peddle their products vs going through snapchat. Also at the time Facebook was yet to introduce advertising on their mobile product. I believe Snapchat will have a much harder road to monetization than Facebook had.
"For today's 14-to-25-year-olds, Snapchat is the new Facebook, in terms of user engagement, market penetration, mindshare"
I'm not saying it's untrue; I would just like to see some reliable data to back this up. Anecdotally; most of the teens I know are using Instagram rather than Snapchat, whereas the people I know using Snapchat are in their mid 20s to mid 30s.
Fortune's April article [1] on the investment firm Piper Jaffray's 'Taking Stock with Teens' survey [2] shows that in their Spring 2016 survey Snapchat has tied or surpassed Instagram for most important social network among teens; the article includes a graph of the last 3 surveys. Mediakix, which specializes in social influencer marketing, publishes periodic assessments aimed for marketers about the social networks -- with sources. In January they compared Bloomberg and Fortune articles to conclude that Snapchat's video views surpassed those of Facebook [3].
I'm surprised you wouldn't bring the biggest difference - the data. Facebook had tons of user data, even at their IPO, while Snap has relatively little.
Facebook owns PII data -- data the user attests -- and user engagement data. Snapchat just has user engagement data -- data derived from the user's behavior. This is a notable difference, but frankly, at this point in time it doesn't matter: every potential advertiser worth their salt knows that the average Snapchat user is between 14-25. Both services usually know location.
To many advertisers, the Facebook ad platform's sophisticated audience analysis isn't so much value-add as a way to prune people unlikely to be interested from being shown your ads. This is why the comparisons between Snapchat and MTV are apt.
Profile information can be useful for the platform itself, since they can use it to target specific ads to people who are most likely to engage with them (watch video, click through or do something else). Since there is only limited space for ads available, being successful with this might be quite important.
I'm a professional photographer and even when I had a medium audience on Snapchat (1000-3000 views/snap), I switched to Instagram stories.
For content creators Snapchat is not good at all. The discoverability problem they have is a serious issue for me.
How do your Insta stories compare in terms of views and view-through-rate? (I am in the same situation as a content creator on YouTube using Insta/Snap on the side)
Not a lot of people use it yet. I have about 16k followers on IG and an average of 500 views/story.
I feel that once IG (if ever) start adding more filters, people will use it more heavily.
I tried to get back into snapchat last week. "Surely they've made the Android app usable by now."
Why is the android app so trash? Why is the UI so convoluted? I want to like and use snapchat because clearly everybody is "getting" something that I'm not, but I genuinely cannot figure out the UI or take more than a few pics without the thing crashing.
Here are a few things that I experience on android.
-When snapchat is foregrounded my phone wont go to sleep.
-Sometimes the camera will just go black, hang, and crash the entire app. I don't know why, im guessing it could be filters.
-Taking a snap with a filter applied sometimes just takes the photo without the filter.
-The memories section is useless, and seems to only exist to keep pictures out of my freely accessible storage.
-Adding things to the images like text or smilies is okay for a single item, multiple things on an image becomes very cumbersome with you resizing things you didnt want to resize.
-the main inbox screen is very cumbersome, tap views a snap, sometimes it lags, and i tap again, only for it to show me a snap for less than a second and disappear. Double tap replys if you just viewed a snap, If you don't double tap perfectly it may think you want to swipe right to chat.
-Inbox keeps getting slower, I get instant push notifications and tap one to go to my inbox, only to wait 2-3 seconds for the inbox to update, sometimes on top of that it hasn't even received the data and i hate to wait for that too.
-Chat and text messages are stupid, You will lose messages because you swipe back to your feed the exact time someone sends you a new message, and kaput the text is gone forever, sometimes messages stay and sometimes they don't and i cant figure out why. I used video chat once and it was a horrible and laggy experience, one which i've never tried again.
-Stories are starting to add ads, which i understand, but the comic event where "the ads load faster than the real content" happens.
-If a story hasn't downloaded the next snap, the app just stops responding until it is downloaded and ready. Most of the time it will register any tap in that frozen state and will skip the snap when the picture/video is finally loaded.
-a few controls like text/drawing color are 1-2 millimeters wide on some phones and makes selecting them infuriating.
I would second that question. I just tried and it takes exactly 4 taps to capture and send a photo or video to someone else on Snapchat for Android (I'm fairly certain the UI is the same on iOS).
So I launch the app. Top left button makes sense, it turns the flash on and off. Top button.... unsure, it's a ghost? Some kind of menu? So I push it, am given a screen with a help button, a picture of a trophy, and a settings icon. Looks like this is the app's "system menu" but also the place where I can managed friends, that makes sense then. Pop back down to main screen, Bottom left looks like messages, so I push that and... it's a massive, unsortable list. I scroll down and see all sorts of different icons. Probably the non-filled icons means the content is "read" but there's a red square, a purple square, a blue square with a triangle (probably chat yea?), a grey arrow, a red arrow. Some filled in, some not, totally unsorted, and it looks like message send/receives are mixed in with "new friend added" messages. So that's a mess.
So now I pop into the mysterious "pyramid of three little circles" menu. It's.. news? "Recent updates" is another list of... friend... stuff... probably Snapchat's answer to Instagram Stories or whatever. More mysterious icons in the top right (other than search, that's obvious).
When I take a picture there's an x (obvious), a postit note, a T (obvious), a... pencil (pretty obvious if so), a timer, a download icon, and a square with a plus (no idea). Also a "send" icon. Throughout all this navigation, I'm lagging, hanging, etc.
Use case: A coworker says "add me on snapchat, here I've got my QR code open on my phone." Starting from the main menu I enter the "settings", click "add friends." "Add by Snapcode" looks right, oh, no, I need to take a photo, it won't actively scan for QR.
There's a sales technique where the first person to state a value causes other people to pick values around it. So Snapchat struck first and says that they are worth 40 billion. Minions listen to that and think that 35 billion would be a bargain.
It doesn't really matter what millions think Snapchat's valuation should be. The vast majority of shares bought at IPO will be from a relatively small number of institutional buyers capable of sophisticated financial analysis.
I see talk of Spectacles being Snapchat's next big thing. However, 90% of the time the popular Snapchat users are filming themselves. Not what they're seeing. So what good would Spectacles be for them?
I can't wait to buy. This one is going to be a good one even if most of the juice has been squeezed by the time it IPOs.
I think people are really hungry for some tech stocks with the kind of brand SnapChat has to invest in. There will be naysayers, Facebook had those but boy did people make a lot of money.
dont forget about sponsored filters. should be a boon for sc. organic marketing. would bet this revenue surpasses sponsored stories. comparisons to fb and twitter are a little off. SC is more of a messaging service than social media
Evan Spiegel isn’t building the next Facebook or Twitter. To some that may be obvious, but it’s important to understand. That’s because Spiegel is driven by the idea that people are looking for alternatives to their curated Facebook and Instagram personas. It’s not a social site, it’s a communication app with a large dose of entertainment on the side.
if youre complaining about discoverabilty you just dont get it and thats OK
FWIW, have only opened Snapchat once since IG Stories debut.. 28 and consider myself tech savvy.
That being said, the only defense it seems Snapchat has is their "instantaneously direct messaging" i.e. being able to send to one person at a time. When or if IG does this, well...
It's not the same way that Snap does it though, but I could be wrong because I haven't gotten a dm in a while. From what I remember, IG's diret messages look like one long chat between you and the person. Snapchat has 2 separate direct messaging paths, one is your basic chat log and the other one is sending snaps to a single person, which is what I think @TaylorGood was referring to
I'm passive and light user of Snapchat, because I'm following around just 40 people and sporadically use it for messaging. I was really enjoying the Snapchat stories, much more than the messaging. I actually think that the whole messaging experience on Snapchat is pretty poor.
Anyway the point is, that I used to have around 30 stories a day to watch before Instagram introduced their stories. Currently I'm around 10 a day and most people who are on Insta and Snapchat prefer Instagram.
Is that just me, or you see the same decline in usage of Snapchat stories?
25-35 billion dollar valuation, and Facebook started at a 100 billion and is now at 373 billion.
Is there revenue/profit going to blow up? I have no idea but the thought that it could become the next Facebook will probably cause the IPO to pop.
I would probably wait for some more concrete data before you invest a lot of money on it as I can see it being equally likely that it will become the next Facebook or the next Twitter.
Just speaking personally, but I thought the hype around Snapchat was on the decline. The app seemed to get slower with every update and people within my social circles weren't using it as much as a few years ago.
Their backers and they stand to make money by hyping it up. They are working their channels to get puff pieces written. Not one article I have read is critical of them. Shows you the power of their backers. Doesn't mean you should invest but I bet their backers are powerful enough to make that stock pop the first day.
When a company like snapchat is looking for 4B in addition to existing funding I am left completely dumbfounded.
Can someone please explain why they would need this much cash?