How Snapchat is Missing Out on $1.5M in Revenue Each Day
blog.namomedia.comMonetizing a social user base is a great strategy for making millions of dollars. But Snapchat is clearly aiming at billions, or they wouldn't have turned down the multi-billion dollar offers they've already received. Facebook has little to fear from social apps with millions in revenue... so why were they willing to pay so much for a zero-revenue company? And why are VCs ponying up tens of millions in funding for a zero-revenue product? The potential revenue from these dinky little solutions suggested here won't even break even for the VC.
No, they have something much bigger and better up their sleeves. Leaving a few million on the table now in the interest of potential billions later is a very good trade.
Personally, I think the world is ready for a footprint-free social app - not just photos, but threaded conversation and what not. Like Facebook, only without anything for employers to troll and exes to stalk. I think they could literally beat Facebook. That's worth a lot of waiting and risk.
Well, they're not talking about leaving a million on the table, they're talking about leaving a million and a half on the table every single day ("if only they'd use our product!"). The figure they come up with is a half a billion dollars, which is a much larger number than you're giving credit to here.
That's assuming not-wildly-optimistic assumptions within a self-serving analysis. Dial that back to $100M rather than half a billion, and it's no longer a tremendously appealing option.
Facebook's per-user revenue for US users was $4.19 as of last October (with far smaller amounts for non-US users). And that's with years of experience, rich targeting based on multi-year social data mining, and the ability to embed several ad impressions per pageview. Is Snapchat likely to hit that high mark? Not in the short term, for sure.
> Facebook's per-user revenue for US users was $4.19 as of last October
Revenue per user over what time period?
That's over one quarter.
The data is from their 10-Q: http://files.shareholder.com/downloads/AMDA-NJ5DZ/2956973952...
$832MM revenue from US & Canada, with 199 million users = $4.18
As a comparison, that's half of Twitter's current annual revenue.
And Twitter is unprofitable.
Apparently Snapchat's costs are incredibly low though. At the very least, their employee count is 2 digits, not 4.
That won't last once they're monetizing. They'll have to staff up a great deal.
> Facebook has little to fear from social apps with millions in revenue... so why were they willing to pay so much for a zero-revenue company?
Because Facebook's userbase has saturated and is now leaking off.
To apps like Snapchat.
The collective belief that the limited-life feature of snapchat is worth billions of dollars represents what I think is a massive dilution.
Snapchat does nothing email doesn't, and email is free. I don't own and don't want to own any device which can guarantee any message has a limited life, that's all artificial.
The guarantee isn't crucial, it doesn't have to be watertight; the fact that it sets up an expectation of privacy and non-sharing changes the social context. Enough to become the sexting app of choice. And that's hugely valuable.
Because when I'm sexting, what I want is to have to endure someone's horrible ad campaign.
Hey... How you doin....
Drink Pepsi.
"Snapchat does nothing email doesn't" is about as useful or poignant as saying "A tractor does nothing a donkey doesn't"
Then you clearly don't understand much about donkeys, tractors, or email... or you would rather post flippant remarks than actually add value to the conversation.
I assume you don't use Snapchat then, because it should be fairly self evident.
For one thing, snap chat is audio visual, email is not. The second is snap chat is designed to work in manner to capture the moment without interfering with it, email on the other hand has a very interrupting flow.
So you end up with one product that captures the emotional state of a moment, and the other which doesn't. This weekend for example I received a snap chat taken a friend bombing a motorway exit on roller blades. The fact it self destructs adds to this as well, because its not the content that matters so much as the vibe of the message. When I got that message I was stunned and wanted to see it again, I had the impluse to contact my friend immediately and respond. I would never get that from an email.
I probably get in excess of 100:1 snapchats to emails from friends for those reasons. I also get maybe 20:1 vs Facebook messages now as well now.
My mom sends me videos of the cat via email all the time. My level of 'cool' is such that this is the extent to which people send me videos, but a video of a cat watching Netflix on my mother's iPad isn't any different than rollerblading hijinks: email would work great for either and wouldn't involve a third party trying to extract billions of dollars from this simple exchange.
I get it that the emailing a video workflow might not be that great, but all that's missing is a good app for it. You don't need an expensive middleman trying to squeeze profits out of simple communication (Facebook, twitter, snapchat, SMS, etc) when entirely free alternatives exist and have fundamentally better foundations.
E-mail sucks because you _can't_ funnel huge profits out of it, so it hasn't gotten much attention. There is a real and huge opportunity for making communication better without trying to vendor-lock your users into ad-laden privacy hell, but it hasn't quite been done yet.
I have ideas, but I don't yet have the resources or motivation to move on it and might never. I hope somebody does though, because I'm tired of dealing with the middle-men in personal communication and afraid of the potential for abuse of power many of them have.
> No, they have something much bigger and better up their sleeves.
Better security and real privacy (messages that are private from the company itself) would be nice.
"Turning on ads" is not a magic monetization panacea for an established startup because you will lose users in protest. And there are more than enough replacements for Snapchat for those users to go to.
Which apps are Snapchat replacements? Which ones have an existing userbase?
Instagram. They have direct picture messaging that's very Snapchat like.
They only share the same high-level concept. The execution and actual use-case is very different.
WhatsApp, Kik, Line, etc.
Those are nothing like SnapChat.
Maybe not in functionality, but they hit the same demographic.
This should be titled: How Snapchat is missing out on destroying its "cool" factor by poorly monetizing an app that people can and will easily switch away from if you annoy them.
Silly question: What the hell is SnapChat? I feel like Cave Man living under rocks. I looked up SnapChat's website and there is hardly any info or encouragement why I should use this thing. It totally smells like Instagram which also I never used and know no one who uses it to date. I guess I'm just not cool.
Instagram has 150 Million MAUs. The fact that you don't know anyone who uses it says a lot more about you than it does about them.
It's a mobile app that people, mostly teens, use to send pictures to friends. The user can choose how many seconds each picture will be viewable and after the timeout, it's gone.
Are we sure the fill rate would be 100%? There isn't an infinite supply of ads waiting to be displayed.
Exactly. Many ad companies fill less than 10% of ads outside of the US. Possible that's accounted for in their $1.50 CPM, but they also may be estimating quite optimistically, considering Snapchat would add a huge amount of volume to any advertising company, especially a small one.
From experience, I'm always wary of ad sales folks giving "conservative estimates". This assumes a standard CTR that may not apply based on the medium based on user base, actual interaction rates (assuming that Snapchat users are more tech-savvy and less likely to interact with ads), etc. Interesting, but I'd guess fairly misleading from an actual numbers standpoint, considering it's in Namo's best interests to inflate the numbers for PR purposes.
I, personally, won't sit through a 30 second TV ad to see a 10 second (at most!) video from a friend.
What is wrong with the sort of thing that whatsapp do? a small fee (~€1) a year.
If they could make it payable via some easy method (SMS?) then people would willingly pay a small fee for the use of snapchat. Sure people would go "Bah Humbug! Snapchat want me to pay a €1" but they have a very strong userbase, one that is extremely active. In the long run, I think their user base would prefer a one off payment than being inundated with advertising.
I've always thought the best way for Snapchat to monetize would be to offer you one more glance at a photo if you watch an ad first. They could even make it opt-in on the photo-sharer's side. Give them a small percentage of the revenue generated by that advertisement to encourage opting-in, and also spur continued use of the service.
Even if this is true, this assumes that the snapchat user base will remain stable. I've yet to see a substantial argument of why snapchat isn't just another fad. Does anyone else have this concern or am I just being pessimistic?
I have ads in snapchat right now and it isn't very intrusive.
I don't have any ads in mine. Are there screenshots of what those look like right now?
You shouldn't have any ads... ;)
Edit: Here is a screenshot: http://i.imgur.com/QWYVFFq.png
Better idea: allow users to pay to "keep" the snaps for a bit more longer.
Even better idea: after those users pay, offer the senders an option to pay to delete them sooner.
Repeat, until the cops show up. ;)
"This is horrible, this idea" - http://www.youtube.com/watch?v=xlA9bNk3b5Q
For Snapchat, monetizing with 320x50 banners or full-screen interstitials would degrade their user experience and deliver a serious hit to their brand.
Not really. They already have Evan Spiegel (Valleywag him) as their CEO. People who care about quality are not going to use it. "A serious hit to [the] brand" is a non-threat. What brand?
Quick - name the CEO and ethical position of your preferred gas company, toothpaste supplier, and shoe manufacturer?
For the long term, and I don't know anything about Spiegel or Snapchat so I'm just taking your comment at face value, you are right about the negative impact a poor CEO can have. For a short-term hit to the brand, I would suggest most users neither know nor care.
The impact of the CEO over time will come from within (loss of good staff, failure to respond to market shifts etc) not external branding - as long as he doesn't go shooting elephants.
This is not a very good argument... I don't think a significant portion of their user base knows about the identity of the CEO, nor do I think it has an impact on the quality of the app.
There are real issues with the quality of the app though. Maybe I'd use Snapchat if it didn't force restart my phone every time I tried to load a message...
And what percentage of Snapchat users do you think have any clue who that is? As an HN reader (so already a tiny minority) I still don't know who he is.
Why is everything bold?
This is a serious question. I find it hard to read.
But thanks for the downvotes anyway.