a) To build an ad business capable of handling $100m of ads. You need massive investments in sales, infrastructure, tools, etc. to build a business like that

b) They have one of the fastest growing user bases in the social space, their users spends an astounding amount of time on the app (estimated at 30 minutes per day), and their user base is the most targeted demographic for demographics. Also they have literally barely turned on the advertising machine and their initial forays have already hit a revenue run rate of $300M+.

So essentially they have a shitload of eyeballs, the eyeballs are growing massively, their eyeballs spend a lot of time on their app, and advertisers love those eyeballs. Their business valuation is based on massive potential, not current revenues, but their advertising efforts already show huge promise. There is almost no startup with anything close to their engagement, growth, and monetization potential and the last company that looked like them was Facebook. Hence, the HYPE.

To your point b... so it's all about bubbles? A race for eyeballs before they disappear to the next "new, cool" thing?

Because advertising isn't working for the people that sell "things." If social networks are supposed to create spending/buying in retail (both online and meatspace) they are not doing a very good job. Google: Retail sales 2016.

Fair point re: connection to the actual economy. But remember - the point of advertising is mostly not to increase sales overall, it's to steal sales from your competition in a zero sum game.

As a teenager, it's almost constantly open on everyones phone - I wouldn't be surprised if I have it open/constantly checking it over 5 hours a day.

Agreed. As a relatively light user (relative to friends), I easily spend hours a day with the app open. It's easily the most popular app for people in the teenage demographic, and anyone who's spent any amount of time with teenagers will realize this.

I wonder if the user base that rushes in so fast to Snapchat might not rush as quickly to the next cool app, whenever it pops up.

Especially once it starts getting cluttered with annoying ads.

Or when Mom and Dad discover it and try to move in.

The way Snapchat is designed is basically anti-Mom-and-Dad -- you get to choose who each message will go to specifically (like texts), and everything disappears after it's been sent or opened. For a parent trying to monitor their kids on Snapchat, there's really not that much you can do.

> 30 minutes per day

I don't know about you guys, but my friends spend probably upwards of an hour a day at least.

Why are advertisers so interested in teenagers?

I spend more money in a month at 25 than I did in a year at 18 and with less thought put into it too. I would have assumed people like me would be the primary advertising target demographic.

some possible theories: -teenagers may have less disposable incomes, but they are far less rational and discerning in their purchases. they make purchases much more based on emotion and trends, rather than utility or value. yes, i also have more money at 25 than 18, but at 25 my purchase decision is informed by different reasons because i'm making my own money now so i need to be smarter about how i spend it. -teenagers are at the brink of adulthood. if you can successfully get someone in that age to buy in, there's a good chance they will remain loyal to your brand. e.g mcdonalds marketing happy meals to kids to encourage them to continue "lovin it" as adults. -teenagers are far more "hivemind", so if something catches on with a popular group, aka the thoughtleaders or trendsetters, the marketing effect cascades across the entire landscape very quickly.

Re: WhatsApp.

WhatsApp was a possible existential threat to FB (usage moving from streams of posts from many many "friends" to more direct conversation in smaller chat groups), so $19B when spread across the many years of "non-death" of the company can be recuperated even if they don't earn a dime from WhatsApp thereafter.

a) Why they need so much money?

"Need" is probably the wrong word. I imagine they're trying to maximize their return: sell enough stock to make lots of money, but not so much as to flood the market.

b) Why they are worth so much?

That's the question, and it really does boil down to "they're worth what people will pay". One side might argue that it's a game of musical chairs--someone assuming they can find a greater sucker to buy into it for more money down the road. Another side might be that they have a massive user base of people just starting to make money (high school & college graduates) who are willing to spend $5/mo on stickers and filters and stuff, as well as watch some ads.

If they can effectively maintain their audience (a huge "if"), they will make lots of money. If they lose them to the next funny app, then they'll be a gigantic bust. So far they've continued to grow.... (Personally I think they're trying to IPO before the bottom falls out, but hey, what do I know)

A) They have the capacity to deliver state-of-the-art technology and can easily dominate with a surge of money for mass-production of electronics. On a whim they could deliver unparalleled face recognition for instance: https://hackernoon.com/is-snap-inc-building-a-wearable-face-...

B) They're worth so much because on any given day, the app reaches 41 percent of all 18-to-34-year-olds in the United States. They have amazing potential as a platform for advertising, recruiting, sales, and so much more. They're probably not making money yet because they're not done honey-potting everybody like Facebook circa-2008.

You may be right about a bloated WhatsApp $19B price, because the Snapchat data is much more valuable and going for $4B.

Is there any indication they can monetize their audience? Twitter claimed to. How is snapchat different?

They have the ability to monetize unexplored territory like face recognition and AR in real, meaningful ways. They've built an amazing technical team and are in position to execute on ideas that could have an incredible impact on the way humans interact in real life. They are among a few tech companies whose tech could cause a cultural paradigm shift akin to what we saw with the introduction of the smartphone. This should be an exciting couple of years.

While I agree they are working on cool things, this is entirely separate from an ability to monetize it. This is the part I doubt; I don't see anything that indicates they would succeed where twitter failed.

AR filters are huge on the app. Being able to use them as advertisements has already proven successful.

Hmm, I'll believe that when they turn a profit.

On a - I have no idea.

On b-

Not sure if it's worth $25 billion, but I have noticed that it is the "Facebook" for younger generations, and that when they use it, they use it all the time, not just a few times a day like other social media. It's a way to share their lives - in real time - with their friends and followers, and have their friends do the same.

(Look at me sounding like an old man!)

That isn't "old man" that is practical thinking. Kids don't have any money!!!!!!!!!!

But kids do have income increases and their highest years of earning ahead of them. That has to be worth something.

How visible are AOL Instant Messenger ads to you these days? ;)

Point. But I'm not going to discount the non-zero effect they likely still have on my reasoning for choosing certain brands when all else is equal.

that's a fundamental misunderstanding of marketing. you probably subconsciously remember some of the ads, and even assimilated some of those messages into your psyche without realizing it. these probably manifest in ways like when you want to buy something and can't help but seem partial to a particular brand even though you're not sure why.

It will be worth something when they actually spend those dollars. Until then, we are talking about potential. Remember the dotcom days, lots of potential.

I won't tell you to 'produce some spectacles' but Snapchat has been incredibly blunt about their goals. They claim to be reinventing the camera, and with AR, that probably means lots of R&D $. So probably not spectacles, but their next camera products.

"Need" money? You mean "want" money, right? And there's no wrong reason to want money since this is the US. Maybe he'll turn into a huge benefactor like Bill Gates and return all that money back to charitable foundations, etc.

a) also for r&d/acquire technology for AR/VR, we're just getting a taste of where they can go

Need, as in, they couldn't capitalize enough for spectacles to be on store shelves for xmas. Obviously, something is very wrong.