I don't remember that. People thought that Facebook couldn't match Google-level ad revenue, but the monetization model was abundantly clear for Facebook as soon as it became obvious how much personal data they were tracking. Facebook IPO'd in 2012, at which point it already had over $4B in revenue, and had been generating revenue for years before that.

The much better example is Twitter, which people did indeed say wasn't monetizable, still isn't profitable, and has absolutely tanked since its IPO.

There were lots of question on whether they could monetize on mobile when they IPO'd. I think their stock went down 33-50% from their IPO price until they showed they could make the transition.

http://www.forbes.com/sites/greatspeculations/2012/07/27/fac...

Exactly.

All the data showed that Twitter wasn't monetizable, yet people still threw huge valuations at it.

There is nothing wrong with building apps and platforms that don't have clear paths to monetization, I just don't see why any sane VC would ever invest in one.

Because good VCs make money on the ones that successfully monetize, not on consistent 10% ROI. That kind of return is great, but just be a PE firm if that's your goal.

If you have the money to play the odds like that then more power to you.

I just don't like the acknowledgement that most of their investments will fail.

Naw man, that's just how it goes in VC world. You have to play it like that. It's like a roulette table -- hard to hit a number but pays out 33x. Well, similarly, a very successful start-up can pay out 100-1000x and easily carry the other losers.

Is Facebook or Twitter the better analogue to Snapchat? Twitter has revenues of around 600M per quarter but lost 80M as its growth stalls.

The difference is that Facebook was within reach of cashflow positive at all times in it's growth, ie if they fired non-core staff could be cash flow positive within months (source: Mark Zuckerburg talk I went to). It had ad's from within the first few months of existence, that was Saverin's role before he left/was fired but they always built that part of the business and revenues always scaled with expenses.