Why Snapchat and Its Ilk Face a Revenue Conundrum 104
Nerval's Lobster writes "Snapchat managed to attract a lot of buzz in 2013—perhaps more than any other app on the market—and it's easy to see why: in these paranoid times, with the NSA allegedly sniffing around the world's collective inbox, and lots of software on the market designed to snoop into people's lives, it's comforting to have an app that'll vaporize your messages within seconds of their opening. Snapchat's executives see the startup's future as so bright, in fact, that they reportedly turned down a $3 billion buyout from Facebook. But whether Snapchat eventually accepts a buyout offer, or tries to parlay its popularity into some sort of IPO, it faces a rather unique problem: how do you make money off a free app that near-instantly vaporizes all content? Snapchat could emulate enterprise-centric vaporizing-message firms such as Silent Circle and start charging for subscriptions, but that would probably kill the service; a multitude of free rivals would likely spring up, with the express purpose of stealing irate customers away. More likely, Snapchat will probably launch some sort of display ad system, similar to what Facebook and Twitter have now—but given how it doesn't store user information on its servers, it'll probably be hard to monetize its users as extensively as those social networks. With that in mind, Snapchat might be left with two options going forward—either expand its services in a radical new (and more profitable) direction, or sell to a Tech Big Fish for a whole lot of money."
They simply... (Score:5, Insightful)
A Better Question (Score:4, Insightful)
Why the obsession with money? Seriously.
Why is it, that unless somebody's making fat bank off a thing, the thing is considered to not be worth doing?
Pretty simple, really (Score:5, Insightful)
"how do you make money off a free app that near-instantly vaporizes all content?"
The annual payment you're getting from the NSA to make sure they're permanently on the cc list?
Who cares? (Score:4, Insightful)
Re:They simply... (Score:4, Insightful)
... should have taken the offered cash and start a new venture, producing more in long term value.
^THIS.
They obviously started this company without a plan. And part of every business plan is an exit strategy - let alone HOW TO DRIVE REVENUES.
That's why it's important tech entrepreneurs to get a business advisor if you don't have business experience.
Re:Who cares? (Score:5, Insightful)
The point is to be bought by somebody else, not to make profit.
Then... why reject 3 billion from Facebook? How many other companies, with more money to waste, are willing to buy these guys, from where you are looking at it?
More vaporized than a phone call? (Score:5, Insightful)
Yes. (Score:5, Insightful)
Why is it, that unless somebody's making fat bank off a thing, the thing is considered to not be worth doing?
If you are not making money, you can't pay for the infrastructure, help, taxes (like property taxes that you have to pay regardless of your profitability), and other expenses of running the firm - let alone paying yourself so you can pay for rent, food, healthcare, student loans, etc ....
As far as them not taking the 3 billion, that's because they haven't planned and their hubris in thinking that, some how, they can make more on their own.
Re:A Better Question (Score:3, Insightful)
You better explain to me who is paying their bills? They have employees, right? They are renting space somewhere, correct? They have servers running, so they bought those, isn't it so? How about energy and support and maintenance of those servers?
So you better try and find an explanation how can a business live without making money and if the bills so far were paid by investors, then why are you surprised that investors want to see a return?
Re:Doesn't store information? (Score:4, Insightful)
Because people that use Snapchat are people who care about privacy
Please. The majority of users are using it because it's a fad.