Why Snapchat will never be worth $3 billion


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It was the number that ricocheted across the Internet, a number so large it couldn’t be real: 3 billion. Dollars. In cash. Facebook reportedly offered that tidy sum for Snapchat, the disappearing-message app that has become tech’s most sought-after startup.

Messaging apps are the future, or so the conventional wisdom goes. Facebook has a stand-alone Messenger service and tried to beat Snapchat at its own game with Poke (which went nowhere). Twitter has experimented with its direct-messaging feature and is reportedly exploring ways to separate DMs from the rest of the microblogging service. The market has a slew of over-the-top messaging apps—WhatsApp, Kik, Viber, and the like—but Snapchat stands apart because, like Japan’s Line, the app is less a text-messaging replacement and more of an experience.

Facebook’s Poke app accomplished next to nothing—unless you count driving additional traffic to Snapchat.

Snapchat is unique, but the app makes no money, and it doesn’t have many users compared with other popular services that skyrocketed to success and then sold out to larger companies—and did I mention it makes no money? An offer of a few billion dollars is a lot of pressure for a little startup to handle. So let’s look at why Snapchat has captured the imagination of an undisclosed number of young people, and why that magic-carpet ride can’t last forever.

Is this thing on?

When I was a teenager in the early aughts, personalization was huge. You were defined by your MySpace page, with its blinking graphics and autoplaying theme song that spoke volumes about your personality. Your Top 8 reflected your changing alliances. Teens in my day chronicled their lives on diary sites such as LiveJournal, DiaryLand, and Diary-X.

Snapchat messages disappear in 10 seconds or less.

Today’s teens are less into spilling their guts through prose and poetry in a digital diary—especially one open to public scrutiny—than they are into sharing images of their lives. Photo-heavy social networks such as Instagram and Tumblr are huge with teens, but Snapchat is the social startup that every analyst and tech CEO is watching. What’s the appeal?

I am just outside Snapchat’s core demographic—13- to 25-year-olds, according to Snapchat’s 23-year-old CEO Evan Spiegel—and I have no real need or desire to send disappearing photos to anyone, so I decided to see what else Snapchat is good for.

The great thing about Snapchat is that it’s incredibly simple to use. Sign up, pick a username (this was the toughest part because all the good ones are taken), and then import your contacts into the app. Snapchat searches the people you have stored in your phone to see if they’re already signed up, rather than mining your friends lists from other social networks. You might run into trouble here: If none of your close friends use Snapchat, you have to recruit them. Good luck getting professionals with busy lives to sign up for yet another app. (I know, I tried. It was like pulling teeth.)

But once you do have friends on the app, sending self-destructing images with funny captions or hand-drawn doodles is a pretty great way to waste time. I use a lot of social apps, mainly because it’s my job, but I rely on a few stalwarts because my family and friends use them. Few people I know are on Snapchat, so I talked to one 25-year-old who uses the app regularly. New York–based Derek Smith uses Snapchat to send funny photos and videos to his friends, who work in the same creative circles. Snapchat isn’t like Facebook or Twitter, Smith says, because it’s for messaging your close friends.

“I think that’s something that’s appealing about Snapchat—there’s so much more control,” he says. “It’s not something that’s going to be seen by anyone who checks out my profile. It’s strictly something I can get creative with.”

He adds that although Snapchat has built up a reputation as a sexting app, he thinks that more people use it the way he does—as a Vine-meets-Microsoft-Paint service for silly private messages.

But it might be difficult for Snapchat to fight that naked-selfie image and broaden its appeal—if that’s the service’s goal.

What’s the big deal?

Snapchat CEO Spiegel is obviously either holding out for a bigger payday—yes, bigger than $3 billion—or biding his time for a public offering, as a slew of other social media companies have done in recent years. But those companies have found that they need to prove their worth beyond just being a diversion for teens.

Evan SpiegelFlickr user Rory Cellan
Evan Spiegel, the man who said no to a $3 billion buyout.

America’s youth are a highly sought-after market, but as columnist Farhad Manjoo noted in the Wall Street Journal last month, teens are notoriously fickle and not at all good predictors of what will be successful when it comes to technology. Teens loved MySpace. Then Facebook came along, and it was newer and cooler, and soon they adored Mark Zuckerberg’s college-only social network more. Now Facebook is a big ad business, and kids today just want to send silly photos on Snapchat.

Facebook probably should be worried that teens aren’t checking in as regularly as they once did. Exactly how many users Snapchat has is unclear, though by some credible estimates the app has about 25 million active users in the United States. Facebook wants Snapchat, but even as Spiegel continues to rebuff Zuckerberg’s offers, Facebook boasts more than 1 billion active users and is entrenched in people’s lives. Teens have found something that’s more fun right now, but they’ll grow up, they’ll quit taking risqué photos they need to hide from their parents, and they’ll move on. Their relatives, friends, classmates, and coworkers will converge on one social network—maybe Facebook, maybe whatever comes after Facebook—and the babies born in the aughts will find some new way to share their lives online. It’s the circle of life.

Snapchat appeals to teens because it’s fun. It’s new. It doesn’t have ads. But if Snapchat sells itself or goes public, those things that people love about it will disappear. It will become something else, something less organic and more corporate. The reason why Facebook is losing teens’ attention—losing its ubiquity—is the same reason why the next wave of teens won’t use Snapchat, if the service continues to grow.

Spiegel could prove wrong every doubter who says that his best bet is to take Facebook’s money and run. Maybe Snapchat will launch a successful sticker business and rival other powerhouse messaging apps such as Line. Maybe kids won’t care when brands hop on the service en masse and start trying to sell them stuff. But if anyone is betting on Snapchat to become a billion-dollar company just because it’s popular with teens, well, I have one question: Do teens today remember Tom? I know I’m going out on a limb here, but I’m guessing no.

This story, "Why Snapchat will never be worth $3 billion" was originally published by TechHive.

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