Snapchat is the next Groupon.

A wildly popular app that is valued at much more than its worth.

The primary issue is that it has no clear, scalable, revenue streams.

The secondary issue is that it is a frivolous product.

Snapchat makes revenue in two ways:

1. An old-school news section where advertising is sold on a one-off basis.

2. In stream ads placed during “stories” that are compiled for live events.

The first method has no scale or relevance to snapchats model.

Its as if their executives thought:

“Well, people are in this app a lot, why don’t we just make a separate section that is a news app? Maybe people will get confused and spend time there and we can sell ads at them.”

The second makes more sense. Snapchat’s live stories are arguably their most innovative contribution. The problem is that they are tied to events. If snapchat is to live up to its rumored $25 billion valuation, it cannot just make money off advertising to their users who are at live events.

They’re now looking to get into hardware, with, custom build video glasses. These will run into the same issue that Google Glass did. Nobody wants to be constantly filmed. It seems like a good idea when you’re surrounded by tech nerds but doesn’t fly in the real world.

The core problem they face with monetization is that most of what snapchat is used for is extremely frivolous.

Most snapchat stories are photos of food. Or photos of drinks. People care about it because they are their friends using it and they themselves are boring. They have major FOMO.

They become addicted to checking snapchat to see if there is something new. But they aren’t actually getting value from it. Businesses can’t get real value from it.

There is a reason young people overwhelming use snapchat. Its a place for frivolous superficial messages.

Its possible they turn it around, but unless they are able to stake out a new and different approach, they are bound to languish over time.

What are your thoughts on snapchat?

^Day 198/90 434

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s