When Facebook offers to purchase your startup for $3 billion, you take it, right? Not if your startup is calledSnapchat. Its recent rejection of the colossal sum has many scratching their heads. Is the mobile photo sharing app really worth billions of dollars, or more? Let’s take a closer look.
Beginnings:
In April 2011, Stanford students Evan Spiegel and Bobby Murphy sought to create a mobile app where friends could privately share funny photos and awkward selfies. At the time, Instagram and Facebook ruled photo sharing. However, the permanence of these platforms had always discouraged users from posting anything remotely incriminating or embarrassing for friends to enjoy.
So what Spiegel and Murphy built was a messaging tool that allowed users to share “snaps” (photos and video clips), with a catch. The content was temporary. After opening a snap, the recipient had a select number of seconds in which to view it, and then it would disappear—forever.
Powerhouse potential:
While testing Snapchat a few months later, Spiegel texted a friend that “This thing is a rocketship…Our 7-day retention is 60% right now (target is 30%) and we’re growing.” Snapchat spread rapidly and began to make news as it gained traction with high school students.
Fast forward to 2013, and the app has grown in a big way. In a September interview with TechCrunch, Spiegel says that users now send over 350 million snaps per day. There are anestimated 30 million monthly Snapchat users and 16.5 million daily users, although a source close to the company states that even these figures are “way too low.”
Snapchat has edged past Facebook in daily photo uploads and is close to overtaking Instagram, Facebook and Flickr combined, according to Business Insider. Impressive figures, but the app has yet to monetize. So what is all this engagement really worth?
The multi-billion dollar price tag:
In November, Facebook offered to purchase Snapchat for a tidy $3 billion. Execs hoped that the app would revitalize Facebook’s appeal to teenagers, who, in recent years, have shunned the network in favor of others, says the New York Times. Ultimately, Spiegel and Murphy rejected the offer.
So, is Snapchat worth more than $3 billion? Is it worth $3 billion at all? Opinions are mixed. Much like Instagram, many—Facebook included—see the potential for big brands to advertise on Snapchat, helping them reach an elusive, highly valuable demographic. In fact, Snapchat recently hired a former exec from Instagram to help plot the company’s future.
Apart from ads, Snapchat’s Chinese and Japanese counterparts, WeChat and Line, have been able to monetize by selling extra stickers and games. The potential for profit exists, but just how the company will do it remains a question.
Looking ahead:
Thanks to Snapchat, “ephemeral content” may be the new social media catchphrase, but is it the next wave of mobile communication?Forbes, for one, believes that Snapchat is just the beginning. What do you think: is there any value in ephemeral content for brands?
Update (12/12/2013): It looks like Instagram and Twitter have caught on! Both apps are integrating private photo messaging into their platforms as a challenge to Snapchat. Twitter will allow users to send photos via Direct Message, and Instagram is introducing private, user-to-user photo sharing. While neither of these new functions make use of ephemeral content, don’t bet against it in the near future.