The $3bn Snapchat ghost

Last week, Snapchat turned down a $3bn offer to be bought out by Facebook. Snapchat is the rage now, but, like its media, is the rage ephemeral or valuable? It depends how you look at it…

140px-Snapchat_logo[1]Snapchat’s founders were dumb for turning down Facebook’s offer. Here’s why:

1) Snapchat is not a platform. It can’t be. Doing so would contradict its own value proposition.

2) Lack of platform means greater difficulty in creating native advertising–least of all, native advertising that’s worth engaging.

3) The content in Snapchat is not novel, nor unique to that app. This makes long-term product differentiation a bust.

4) The value proposition is in “temporary social media”. That is antithetical to the marketers’ notion of “eyeballs/engagement”.

5) Because the “temporary” aspect of the app is a marginal technological addition to the core of any other messaging service (read: SMS/MMS, FB Messenger, Google Hangouts), and because there are other competitors (WhatsApp, WeChat), there is limited differentiating growth potential.

6) Get someone else to sort out the revenue side.

facebook-icon-app[1]Facebook was dumb for offering Snapchat $3bn. Here’s why:

1) Facebook is looking at new ways to make its site “stickier”. “Temporary social media” is antithetical to that.

2) The fact that teens are flocking to Snapchat doesn’t make its acquisition a panacea for avoiding the fate of MySpace.

3) Snapchat may have 400million daily pictures, but it has no user data. This is a waste for company that’s core competency is building profiles of user data, use it, and/or sell it.

4) Messaging “platforms” aren’t platforms at all. Ever since the cost of SMS dropped to nearly $0.00 (those costs born by telecom carriers, not by internet/data-driven apps) its popularity has been in straight communication. Your own Facebook Messenger should demonstrate that people aren’t looking for bells and whistles when trying to communicate.

5) Until you can evidence the “eyeballs/engagement” anywhere in the model, you’re going to spend a lot of time and headache justifying to shareholders an obscene valuation.

All of this isn’t to say Snapchat isn’t valuable, or that it can’t become valuable in the future (i.e., if it develops an API a la Facebook, Twitter, even Pinterest, contradicting point 1 above and becoming a platform), but to say that $3bn is an outrageous sum of money for something that’s demonstrating marginal differentiating value.