The essence of business is solving problems that are important to other people with solutions that are interesting to you.
That sandbox is a lot bigger than the sandbox you & I like to inhabit. The set of folks interested in technical programming & startup-related news probably numbers under 100K. I was an admin for a Harry Potter fansite in college that had 100K registered users, close to 1M when guests were counted, and we were far from the largest Harry Potter fansite. The set of folks who like clickbait, celebrity gossip, hanging out with friends, and making funny faces is a couple orders of magnitude larger than that, probably past a billion.
People are very different in their refined passions but alike in their base desires. That means that anything that caters to base desires, by definition, will have a market size much, much bigger than sites that cater to refined passions.
http://www.wired.com/2007/10/facebook-future/
So if facebook is the benchmark, it doesn't support your valuation of $200B for snapchat with 50M in revenue.
Turns out I was right - much of the Instagram and SnapChat usage is coming out of the pool of attention that previously belonged to Facebook - but the cycle time seems to be ~10 years, and getting longer with each generation of social software. If the history of mass culture & mass consumerism repeats itself, eventually the cycle time will be greater than a generation - forms of social interaction for the baby boomers stayed roughly constant for their whole lifetime. At that point it's meaningless to talk about shifts to the next big thing, because we'll all be dead before they happen.
* GM * Ford * Honda
Combined. That is ridiculous and just highlights how big a bubble is brewing in SV.
We value a couple hundred million fickle users more than hundreds of thousands of actual employees, physical factories, and entire supply chain industries.
The valuation (market cap) of a company is a reflection of the value of the assets that the company owns. That includes IP, trademarks, brand assets (somewhat perversely, this also includes user habits), business relationships & contracts, any resellable physical goods or cash that the company owns, and all future cash flows that will accrue to the company. Basically, the stuff that an employee, supplier, or customer could not take with them if they chose to do business with someone else.
Now, there's also the concept of economic value, which is the value that customers of a company (or industry) are willing to spend on its product. This can be reasonably proxied by the total revenue of the industry - for your GM + Ford + Honda example, that's about $150B each, or $450B (and leaves out the 800 lb. gorilla, Toyota). That's a lot larger than the total $60-80B market for all brand advertising.
But building cars has a long & large value chain. GM + Ford + Honda can't do it all on their own. They each employ roughly 200,000 people, many of whom are relatively highly paid thanks to union agreements. They have literally thousands of suppliers that they buy parts from. These suppliers themselves need to buy parts and supplies from labor-intensive industries like mining. As a result, the company captures comparatively little of the profit from all of this work. Facebook, for example, makes about $6B in net income off $20B in revenue, while GM makes $10B in profit off $150B in revenue. This also implies that further growth will benefit companies like Facebook or SnapChat much more than it would companies like GM: if margins stay the same, Facebook gets to $10B in profits with $30B in revenue, while GM would have to get to $300B in revenue (probably not happening) to get to $20B in profits.
It's a plus, from a shareholder value perspective, that SnapChat only employs 200 or so people, and their largest expense is paying Google for AppEngine bills. It means that whatever value SnapChat creates, the shareholders will capture almost all of it. Indeed, based on how often car commercials appear on TV, it's likely that a good portion of GM & Ford's revenue will become SnapChat's profit, just like how a good portion of SnapChat's revenue becomes Google's profit.
I completely understand that from a shareholder perspective companies like facebook and snapchat are huge wins.
However my argument is that as a society these companies have very little value. I believe that the current wave of tech startups are the equivalent of shareholder junk food. I nice relatively immediate return, and no real long term value.
Was valued at 25B in 2000, ended up getting acquired by Yahoo for 235M. In terms of stocks - from $241 down to $1.63
That easy replication of the product is exactly what I'm talking about. Search engine is actually a much more sophisticated setup and even in that space multiple companies went belly up.
If snapchat shutdown tomorrow would anyone actually care, or would they immediately shift to the next best platform?
Compared to say a public utility, car manufacturer, global shipping company, etc.
There are real problems in the world, and snapchat doesn't solve any of them. There are real companies trying to solve these problems, and snapchat is worth more than most of them.
Our obsession with "incredible forms of communication" is in reality just a VC fueled gold rush capitalizing on the current flavor of the week.
You can say this about a lot of great companies. Toyota shuts down tomorrow, I buy a Honda instead. Sure, I wanted the Toyota, but I'm not going to lose any sleep over it. UPS shuts down tomorrow, I use FedEx. Apple shuts down, I use Android. Starbucks shuts down, I go to Peet's.
Snapchat employ's next to no one in comparison and is worth more than entire industries.
These people are already connected, they can communicate on Twitter, FB, SMS, email, phone, skype, gchat, facetime, whatsapp, line, vine, periscope etc etc.
Snapchat is just the current prom queen. Everyone wants to be her date, but in 10 years she will be working at Dairy Queen.
First you compared Snapchat to a completely different industry (automotive) to imply it has an inflated valuation (as though tangible products and heavy manufacturing somehow make a company more legitimate). When a commenter replied with an excellent rebuttal in favor of Snapchat's market position, you instead made the argument that Snapchat does not contribute long-term value to society.
When the parent commenter criticized this viewpoint by drawing a connection to HBO and countering that not all businesses need to change the world, you claimed that people don't need to be any more connected than they were before Snapchat, since they had things like Facebook, Twitter and texting. Why build different things? Why not just be content with the communication platforms we have now? How about we just don't develop things people clearly desire because, "eh, fuck it, they've got general ways to talk to each other already."
Finally you circled back around to being incredulous that a company with only 200 people could be worth more than entire industries and "supply chains." Of all the market analyses available, like margin comparisons or growth potential, you chose to zero in on the number of literal employees as some sort of indication of impact.
How long are you going to move the goal posts? You're one of the most active commenters in this thread but your rhetoric, particularly the bit involving the automotive industry, reminds me very strongly of the way in which people who are too set in their worldview can't fathom the value of new and different technology.
Judging by the political valence of your "VC gold rush" comment, I assume this is where your bias comes from. That and the automotive comparisons lead me to believe you're deeply uncomfortable with the idea that a small number of relatively wealthy, skilled elite can completely dwarf industries built by the comparatively unskilled masses all the while enjoying cushier jobs, better social status and wild employability (to put it as starkly as I can).
Follow this thinking deeply enough and it could even be expressed as simply as, "It's not fair." But that's leverage for you.
If you want to really debate about the future value of Snapchat, why not add some real nuance to the discussion and talk about its advertising platform's advantages (or disadvantages) compared to Google and Facebook?
But it can never be that simple, can it? We got to grow! monetize! have another fundraising round! justify it all with increasingly complex features of progressively marginal utility that further dilute the core funcionality that made it so popular in the first place.
Imagine if HN were to succumb to this disease, it would be a travesty.
The existence of the one doesn't invalidate the other. There's plenty of room in this industry for both types.
Those guys are all millionaires now. They don't give a shit about anything but money and extracting everything they can from their users before they fizzle out and die.
Go to the movies? Play a video game? Watch a sporting event? All of these are mostly meaningless but fun activities.
I think it's great that a lot of people are working hard to build fun things for other people.
Think about that.
In re "is this just 'damn kids these days' speak", no, I suppose I'm one of them. But if a picture's worth my while then don't make it arbitrarily temporary; if it isn't don't send it at all.
It makes no difference to me whether or not shapchat succeeds, just as it makes no difference to anyone whether or not you get their snapchat message.
language aside, you're hitting on an important idea that a lot of people are missing:
'trivial' doesn't mean useless, but this specific type of artistic agency and communication are unfortunately the only means of expression most have when there are no economic means of personal expression (i.e. going back to college, affording consistent healthcare, paying rent without going in debt, having disposable income to go out with friends, buying materials/server-space to use as means for artistic or scientific personal expression rather than needing to rely on a pre-programed photo-filter).
there's an honest sadness to the idea Snapchat is funded so heavily when the same amount of money could be used to fund multiple small businesses who might need to integrate tech into their operations and who can create jobs for people who need them
I don't think making movies is trivial. It has a large effect on culture and really at the end of the day, as humans, all we have that's uniquely ours is culture (for various broad definitions of the term). Think about how much Sci-Fi movies, novels, and similar ideas contributed to our drive to go to the moon - as a society, not just a country.
Snapchat affects culture, and really what's more powerful and impactful than that? It gives people an ability to tell their story in interesting ways. It gives people a platform for expression. You get a brief, unique glimpse into someone’s actual life from anywhere in the world. This ability to affect culture isn’t unique to Snapchat by any means, there are lots of things out there that affect culture in unique, interesting ways but I don’t think their effects can be understated or written off.
I think the crux of the issue is, people have a narrow definition of "solving problems". The "problem" has to be clear cut with a clear outcome otherwise it isn't a "real problem". But I don't agree with this type of thinking.
There's something Steve Jobs said in a talk that’s stuck with me ever since. Here’s the quote: “The most powerful person in the world is the storyteller. The storyteller sets the vision, values and agenda of an entire generation that is to come and Disney has a monopoly on the storyteller business. You know what? I am tired of that bullshit, I am going to be the next storyteller”.
The rest, as we all know, is history. And really, he has a point. Just look at Facebook’s effect on global culture. It’s incredible in its pervasiveness. We’ve entrusted the group of people building Facebook to drive this effect on culture at a scale we’ve never seen before. It’s a huge responsibility and they have to balance it with business interests which as you can image is very very hard.
But to write off something with such a large, global scale is incredibly short sighted. We underestimate the effects of these things on our lives greatly.
Look, I’m not a Snapchat shill by any means. I don’t even use the product that much. But I try to understand it, and part of understanding the product is understanding the impact. Put aside the nature of the product for a minute, forget that its a photo sharing app, though that is a simplification. Think about just the scale of the application. The scale is absolutely crazy and I’d venture to say that any product with that kind of scale, engagement, and usage patterns WILL have a large impact on culture. As a Software Engineer, that is incredibly exciting to me but at the same time I see it as a very unique responsibility. We need good people building these types of products who understand the full extent of the consequences of what they’re building. The alternative, is not great.
Now whether you think the people at Snapchat have these best interests at heart is a whole different topic of discussion, but I’m tired of people writing off these huge software phenomenon as “just a photo app with no value”. That’s a lazy sentiment and I’m calling you out on it buddy!
"We wanted flying cars, instead we got 140 characters."
Snapchat isn't an accident, it is a well engineered platform built by intelligent people. However it caters to the lowest form of communication that I can think of.
If Snapchat is having an effect on global culture, then god help us. The business itself may have a monetary value, based on its user base. Its product and its effect on communication is toxic, and should be viewed as the junk food of online communication.
(It's relevant if you're going to say that Snapchat Software Engineers' problems aren't "real".)
* Liver transplant protocols
* Military VR for PTSD therapy
* Early R&D for self driving cars
* Long range point to point wifi systems being used in Africa
* VR motion capture studio used in the most of the Marvel movies
* Built several prototype zero net energy homes
* Built several solar concentration array in Haiti with a team after the earthquakes
* Tidal energy generation prototypes
The list goes on.
Respectfully, I find this "other peoples' work is shit and meaningless" attitude off-putting. As someone who does similar R&D work as you (see profile), here's my perspective: Be grateful for getting to work on interesting problems, and don't be so quick to dismiss others just because it doesn't float your boat.
I did say I would have a hard time motivating myself to work on something so trivial. It is why I turned down the job.
Scale is a solved problem, their whole infrastructure is based on Google. They brag about having 0 ops employees.
What are they actually building in house? A UI, some photo filters, and a mobile photo app.
Not worth $20b and not worth a couple years of my professional life.
You realize that social media has created tens to hundreds of billions of dollars of economic value right? Even Twitter, which has struggled has created billions of dollars of economic value. From a utilitarian perspective that is worth far more.
Things that seem extremely trivial, like chat, or the ability to upload photos, become quite an engineering feet when your measuring the amount of photos uploaded at terabytes per hour or more.
Scale these days is a solved problem, there is nothing they are doing scale wise that I can't do in a couple weeks using AWS.
AWS Lambda functions make on demand filters and photo editing trivial. It is one of their demo functions.
Excuse me for being blunt, but this to me seems like a statement someone would make who has never worked at this scale.
Both high burst scale after Super Bowl ads and long running massively multiplayer games.
I am not saying that building services that operate at a massive scale is easy, but there is a wealth of talent and tools out there to help you achieve it.
The fact that all of snapchats infrastructure is provided as a service makes my point for me.
Someone like Snapchat periodically surprises GCP with millions of QPS, something AWS would deem akin to DDOS. With AWS, you'd need to carefully setup infrastructure that statically accepts such scale. You need to plan, test, deploy resources, measure, etc etc. Snapchat has to do absolutely 0 of that - they deploy code. This is a major difference between Google and AWS - with one you can setup scale, but you pay for it, and with the other you get scale as part of your service, out of the box.
Out of the box I agree with you, GCE is much more capable than AWS.
However in my experience AWS is just as capable and much more flexible once it has been setup. Also AWS Lambda functions give you the ability to "deploy code" and has proved to be massively scalable.
I feel that "carefully setup infrastructure that statically accepts such scale" is not an accurate way to describe top tier deployments on the AWS platform.
Something like this is impossible on AWS without pre-warming, pre-setup, or maybe even calling someone - https://www.youtube.com/watch?v=xT6tQAIywFQ&feature=youtu.be
Here's another example: EMR versus Dataproc.
Dataproc has per minute billing + very fast startup times (sub 90s for decent-sized clusters). So with Dataproc, you can rethink how you run Hadoop. Rather than starting with a cluster, which you fill up with jobs, you can have "cluster setup" as part of the job path. This is possible because you don't pay a large penalty in startup, nor do you pay a large penalty in per-hour billing granularity. Oh and Google is much more inexpensive (http://fortune.com/2016/01/08/google-amazon-cloud-price-war/).
Im not going to say snapchat is or isnt worth $20b. I am going to say that I am sad that so much energy and money is being thrown at such a trivial application.
Im a software engineer, and i like solving real problems. I cant imagine working at snapchat and trying to motivate myself to be excited about its useless app.