Snapchat – Hypeware

The hype is peaking. Its time to sell.

• The hype around Snapchat has hit fever pitch this week with constant chatter regarding its spurning of the advances of both Facebook and Google.
• Snapchat is thought to have rejected an offer from Facebook to acquire the company for $3bn with Google having apparently offered $4bn.
• Snapchat is basically an IM service focused on video and pictures that is thought to have around 250m users.
• Its biggest user base is to be found among teens which combined with its rapid user growth has made it a very hot property.
• This is because Facebook, Google and others are struggling to be seen as new and cool and some stats are showing that they are losing their edge with this market.
• This is important as this group of users represents the adults of tomorrow but in the frenzy certain things seem to have been forgotten.
• Teenagers may be hip and cool and represent the future but they have no money.
• Also forgotten has been the fact that this segment is notoriously fickle and services like this can fall out of fashion from one day to the next.
• This means that there are limits to the degree to which this segment can be effectively monetised and risks to its longevity.
• Advertising to this segment certainly has value but that value is limited when those targeted by the ads are not the ones paying for the products.
• Hence, the degree to which Snapchat can monetise its users is likely to be much lower than those services which have an older, more affluent and probably loyal user base.
• Snapchat has no revenues and the degree to which it can monetise its users is totally unknown.
• Hence, valuation figures in these sorts of discussions will be based on nothing more than conjecture and hope.
• Right now the company is the hottest thing since sliced bread and consequently the figures are ludicrously high.
• The founders and VCs would be best served to offload the loaf before it starts to go stale.