Saturday, November 23, 2013

Snapchat and Why Everyone Is an Idiot, Including Me

So a lot of people are speculating that Snapchat is either going to be massively successful or how they will flutter out and die in the vast emptiness of the web. The internet is a weird, fickle mistress who have made it normal to think that a company whose most popular product is a self-destructing photograph delivery service reminiscent of Inspector Gadget is worth $3 billion.

I've been getting angry at every post I've seen about Snapchat. Mostly because they all say the same thing. Snapchat is a fool for turning down the money from Facebook. Snapchat has no future plans for effective monetization on their current model. Snapchat has no way to lock users onto the platform. Snapchat's product isn't complex enough to fend off competitors. Ads will scare away current users.

All of these products are well-thought out and everything... actually they aren't. They are instinctively what might appear to be the case and they're all reasonable enough. So let's consider them one by one.

Questionable Plans for Monetization
Currently they have no future plans for effective monetization on their current model. This is a criticism I have heard countless times and the majority of the instances I first heard this critique is why I find it such a laughable one. This is exactly what everyone was saying about Facebook before they declared their IPO. It's why their stock fell the first few weeks it was on the market.

The same was said about Twitter, a company that even up to its IPO was hemorrhaging upwards of 70 million dollars per year. When it came to monetize, they looked to their user-base and the reach was so widespread that they were able to come up with an effective strategy which was what exactly? Oh! Analytics and lead generation- two simple services that any application sending data can provide.

Ads Alienate
Now- don't get me wrong, this is the reason that Facebook now has more ads. Sure Facebook has lost some users- but they still have a fairly solid core among its original user-base. Or at the very least, one strong enough to warrant a 3 billion dollar offer to a potential competitor. Aside from the fact that the multi-billion dollar mogul is threatened by any company, offering a $3 billion buy-out, one would guess, requires a fairly solid business and budget.

But what about the users that are leaving Facebook? Facebook is suffering from ads! What's the evidence of that? Most reports cite that the users fleeing Facebook are the younger users. Which is no surprise considering that the people most active on my Facebook Wall and Home page are family members. With potential job employers, people who just want to party and post pictures are realizing that this isn't the community for them. Though this does indicate a drop in overall reach, it does not indicate the failings of a business, rather the securing of a niche.

Ads Won't Work for Snapchat
Okay- so maybe ads were okay for Facebook- but Snapchat works differently. Users interface in a short time frame by sending each other pictures. Where is the room for advertisement? Apparently, no content marketers work with PPC or CPC or Google AdSense anymore. Most complaints assume, that ads will necessarily be entertaining snapchats users receive from third-part marketers or intrusive banner ads that will drive users int he opposite direction... because users are too savvy to watch ads.

This is an interesting argument, considering that I can think of a large number of services that don't feature advertisements and extremely successful competitors that do. For example, I generally watch television on a third party site "without advertisements". The site lists all episodes of most every series and by being quick on the draw to a few pop-ups, I have twenty to forty minutes of uninterrupted serenity with New Girl, How I Met Your Mother, Breaking Bad, Game of Thrones, or whatever. 

But the only time I use this series is when I've missed a new episode and it's not up on Hulu, Xfinity, or Netflix yet. The fact is, freemium software has always been around and it's always had a limited user-base. In my life, I've used countless free alternatives including Word Processors, Video Editing Software, Audio Editing Software, MP3 Player Third Party Software (mediamonkey), VLC Player, and (seriously) countless others. But I still pay for premium versions of those types of software regularly. I bought GarageBand, my dad bought Microsoft Office (which came with three licenses) and I've used iTunes Store many a time in the last year.

In conclusion...
The fact of the matter is that if Facebook was willing to shell out $3 billion for Snapchat, it is worth at least $3 billion. If not to Facebook, then to someone, somewhere. Snapchat requires accounts and could easily track analytics for ads which marketers might find valuable enough to form partnerships with Snapchat.

Anyways, there are a billion reasons to think that Snapchat will fail but those reasons essentially amount to one thing: a lack of creativity. So will Snapchat be creative enough to avoid losing hundreds of millions of dollars where even titans like Twitter have only lost tens of millions? Fuck if I know- but get of your haughty high horses on your consumer watch Linkedins- waiting to say I told you so- because your theories are cracked out bullshit and you know it.


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