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Snapchat Monetization

Stashed in: Mobile!, Branch, Instagram!, Path, @ev, Active Users, Snapchat, Valuation, @gallagherbilly

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Billy Gallagher writes:

The recent influx of cash and massive valuation have raised significant questions about how Snapchat will monetize.

A source told me earlier this month that the company was hiring a sizable sales force. Since then, Spiegel and others have said that this is not true. Apologies for the bad report.

Now, Spiegel says the company will startmonetizing with in-app purchases “in the medium term,” but still remains very interested in native advertising.

“There tends to be pressure on companies to avoid generating revenue in the early stage,” Spiegel told me in May 2012, when the company had only raised $485,000. “One, because people believe that the user growth will decline and, two, because it makes it easier for people to value your company. So, obviously working within the context of that pressure is an interesting thing. But we’ve been really focused on revenue from the beginning. We didn’t think we were ever going to raise venture capital, so we were planning very early on to implement a revenue-generating plan.”

In December 2012, Snapchat was already prototyping monetization features. This isn’t something they will rush; there will be a significant spotlight on them when they roll out the first monetization features, and obviously want to protect their user growth.

It seems that as the company has grown more and more, Spiegel and Murphy have pushed back the timeline for monetization as they prioritize user growth first. This is a smart strategy, and one that has worked for other companies.

In the fall of 2010, Instagram had planned to launch with some filters available for in-app purchase:

“With plenty of funding for the two-man team, they’re not too concerned with that right now, but Systrom said that the app will launch with 7 of their 11 filters for free, and the other 4 will be available for in-app purchase (with more coming).”

Systrom didn’t have much to say about this old plan, merely commenting, “It was the plan at the time, but that was a long time ago.” Instagram, obviously, enjoyed massive user growth and a huge exit to Facebook.

“One thing Ev [Williams] has really pushed on me is that there’s never been a very large internet consumer startup that has shut down because they either run out of money or cant make money,” Miller tells me. “The ones that die, [they] die because people don’t like it anymore and they leave.”

Josh Miller of Branch also says that Snapchat is "Path done right."

Billy writes that Snapchat has 5 million daily active users who send 200 million photos per day.

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