Why Snapchat and Its Ilk Face a Revenue Conundrum

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."

Re:Who cares?

[QilessQi]

There was. Google supposedly offered them 4 billion:

http://bgr.com/2013/11/15/snapchat-google-buyout-rumor/ [bgr.com]

Snapchat is gambling that they will keep growing to the point where they can get an even bigger offer.

Meanwhile, how did that Instagram purchase pan out? Anybody know if it's been worth the $1B that Facebook spent on it?

Re:They simply...

[TheRaven64]

Snapchat doesn't delete content (as their recent disclosures about law enforcement access showed). They just stop it being accessible to the recipient. But people assume this is the same as deleting it, so they keep using it to send embarrassing or sensitive pictures. This means that Snapchat is a platform for building the world's largest database of blackmail material, and even better the victims, uh, users, contribute the material themselves. Anyone who can't see a revenue stream there is extremely shortsighted.