expressed shock that Snapchat— the self-deleting messaging service — was now being
valued by its own investors at $US3.6 billion. The company is said to be raising about $US200 million in a new funding round, bring the total backing to about $US370 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 $US3.6 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 $US0. 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 recognise 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 arse.
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.