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Epic Dissection Of Snapchat's Business Model Says 'Snapchat Is Intrinsically Worthless' Even With 26 Million Active Users

Stashed in: Awesome, Monetization, Active Users, @meganrosedickey, Snapchat

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Jim Edwards explains why Snapchat's business model is intrinsically worthless:

We recently expressed shock that Snapchat — the self-deleting messaging service — was now being valued by its own investors at $3.6 billion. The company is said to be raising about $200 million in a new funding round, bring the total backing to about $370 million.

The reason we're shocked: Snapchat deletes its own most valuable product mere seconds after it is produced. It's hard to see how that will attract a large base of advertisers who might want to send disappearing snaps.

Sure, Snapchat is huge — it has about 26 million users, according to research by the Pew Center.

But could it, in the long term, pay back $3.6 billion in profits?

Roy Murdock, a tech blogger (who we're pretty sure is also this guy, an IT intern and LSE economics student) makes a compelling case that Snapchat is actually worth $0. It's a long post, so make yourself a cup of coffee before you begin. But the nut of it is that because Snapchat deletes its most valuable data, it has almost no competitive advantage over other social media:

All that Snapchat gets in the way of useful data is your email address, phone number, age, location/time/frequency of Snaps, and any text you include with your message. With the exception of Snapchat captions, all of this data is already being exploited by other internet services. The location/time/frequency and text data can only really be useful for internal user base and engagement monitoring. Unless Snapchat develops software that can recognize the subject matter of Snaps, there isn't much potential for data exploitation here. This is also where the ephemeral nature of the service comes back to bite Snapchat in the ass.

In other words: No Snap data, no targeting, no ad revenue.

Snapchat might have a case to make that it offers "native" advertising — the kind of Snapchat-specific ads that advertisers pay more for because the audience in front of them is more engaged than regular banner ads. But, Murdock says, "This is little more than a joke at the moment" because marketers can only use the platform in the same way that regular users can — for free.

The icing on the cake: Snapchat has no patents that other companies might want to acquire.

Read Roy Murdock's whole analysis here.

By the way, Snapchat is now used by nearly one in ten adult mobile users, Instagram nears 1 in 5.


Why Megan Rose Dickey deleted her Snapchat:

But once I started using it more and more, I soon realized that most people were using it to send goofy, stupid images of themselves or their surroundings. I have most definitely received some sexts on Snapchat, but that was before random people couldn't find you on the app. 

It's for that exact reason why I deleted the app last night. Unless it's something truly unique, I'm not interested.

I found myself accumulating a bunch of unopened snaps. When I powered through a bunch them last night, none of those 10-second snaps could hold my attention for more than two seconds.

Whether it was someone looking stupid on Halloween, or a documenting a drunken tirade, I always wondered the same thing, "Why did you just waste 10 seconds of my time? Ain't nobody got time for that snap."

Exactly! Ain't nobody got time for that!

More stats from Megan Rose Dickey:

My colleague Caroline Moss feels the same way about Snapchat. 

"I used to like it," she instant messaged me this morning. "But like a lot of apps, it didn't necessarily make my life easier."

Those words really rang true for me. That's when I realized the basis of my distaste for Snapchat. It doesn't add anything to my life. 

But Business Insider Chief Correspondent Nicholas Carlson begs to differ. He's convinced that I'm just snapping with the wrong people. 

"Don't break up with Snapchat," Carlson said. "Break up with your friends."

Meh. Luckily for Snapchat, not everyone agrees with me.

As of September, Snapchat users were sending 350 million messages per day, up from 200 million in June. Today, about 9% of all American cellphone owners use the app, according to The Pew Research Center

350 million useless messages a day. Ugh, Snapchat.

There is no end to intrinsically worthless businesses these days.  That's essentially the definition of all web 2.0., except for maybe Google and others that inventory data end employ it as a tangible asset.

The point of any business isn't to become intrinsically worth-full, it's to become extrinsically valued by others that are external to the business--by WHATEVER facts, bullshit beliefs or irrational exuberance entails...


Traditional businesses have assets that are worth something.

So yes, the good Web 2.0 businesses have databases with valuable data in them.

Snapchat has no such databases. It's just a channel for pushing intrinsically worthless images.

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