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The Key to Snapchat's Profitability: It's Dirt Cheap to Run |

Stashed in: Monetization, Snapchat

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Obviously, we are comparing a much larger service that has advertising — Facebook — to one that is smaller and doesn’t have any advertising (yet). But this doesn’t really matter, in principle. Because even though Facebook has to make sure its infrastructure can store and serve the data needed to sell ads, the reality is that much of the information that helps advertisers target users is the metadata of user interactions — with whom, where, how, and when (as well as what they ‘like’) — as opposed to the content of what those users are actually saying.

This means that despite their differences, storing and analyzing only the metadata would still allow Snapchat to build similar profiles of its users as Facebook. Snapchat could thus sell ads that target users just as Facebook does (assuming of course that their product can attract a consistent customer base) — and with one huge advantage: lower costs, since Snapchat doesn’t need to store or serve any messages after they’ve been delivered.

I'm not convinced that Snapchat is inexpensive to run.

Otherwise, why raise so much money?

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