Snapchat can't really afford to be interchangeable with Instagram, because Facebook actually knows how to persuade advertisers to keep selling ads, while Snapchat just relies on its perceived clout among a coveted demographic, providing very few mechanisms for advertisers to gauge their ROI [3]. Sooner or later, advertisers will wisen up and pull out of Snapchat, making their business model crisis all the more acute.
Snapchat is one of the best-positioned companies to actually trial different business models for their app: they have a respectable install base, their platform is still sticky and desirable enough to maintain a sizeable userbase for some time, and their preexisting userbase is aging into being able to spend some money. Defection to Instagram isn't nearly as much of a threat as many make it seem: most Snapchat users are already on Instagram as well, so as long as they continue to engage with Snapchat, all is not lost.
Their map purchase was an effort to pivot the product's monetization back to hyperlocal factors, and solidify the idea that your Snapchat friends are part of your close-knit circle. Snapchat could be a better Foursquare, but it's not quite there yet.
[1] https://news.ycombinator.com/item?id=12191435 [2] https://news.ycombinator.com/item?id=13168804 [3] https://news.ycombinator.com/item?id=15050410
I don't know if I'd pay for it, but if they wanted to use location to sell ads to local businesses or whatever they could probably tap an otherwise relatively untapped ad market.
1. they could meld the treasure-hunt aspect of Pokemon Go with sponsored hyperlocal recommendations. ARGs (alternate reality games) are popular with Snapchat's core demographic, and if Snap could pitch itself as a platform for ARGs, their advertising woes would disappear.
2. microtransactions familiar from Asian messaging apps: cosmetic stuff like stickers, emoji packs, backgrounds, filters, etc
3. (macro-)transactions for large-scale content inside of Snapchat. Facebook had entire video games playable within it; there is no reason Snapchat can't do this. There is a market for VIP access for 'private' Snapchats of celebrities and creators, but today this is arranged out-of-band, because Snapchat provides no support for this in-app. Patreon was able to make headway in this underserved market.
4. Snapcash could compete with Paypal, but it's vastly overemphasized.
5. Snap Map has so much potential, and it's unexploited. From mundane to exotic, opportunities include location search, sponsored recommendations, user-generated content about real-life places (cf. Yelp), user matching for transactions (cf. Uber), user-generated content anchored in virtual space (AR stuff)...
6. Subscriptions. Either to gate specific content or features, or just for the sake of. Discord has a sponsor tier that gives a few perks but is just as much for the sake of providing support. There is always a subset of users who will pay.
> 5. ...sponsored recommendations,...
i.e. ads and ads. One of the most depressing aspects of the current tech bubble is how most "entrepreneurs" are not making new things, but finding new ways for others to advertise existing things. If they win the lottery and become billionaires, they start building rockets.
What a bizarrely reductionist lens through which to view Snapchat and I guess consumer apps in general — Snapchat is not it's business model (or lack thereof).
Snapchat clearly made a "new thing". It's just looking to an existing business model to monetize that new thing.
I don't see what Snapchat has done that's new. Disappearing messages? When I was a teenager we used to call them "gossip" or even just phone calls.
If the tech industry spent the amount of energy used to glorify petty crap on something more useful we would have been defeated poverty and all diseases a few weeks ago.
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Why are we so obsessed with the ads model. Why not start charging?
This is not a web app, where you have to take out your wallet and enter your CC info; all it takes is the scan of your fingerprint. I am sure people wouldn't mind paying a certain amount per year to keep using the app without creepy apps.
Sure, the revenue will be capped by the amount per year a user is willing to pay, but maybe the days of the fat cows are over?
Short answer: Metcalfe's law. "Metcalfe's law states that the value of a telecommunications network is proportional to the square of the number of connected users of the system (n2)." [1]
Social networks are valuable to the extent that the people you want to talk to are on it. Charging raises a huge barrier to entry, making it very hard to create a large network.
They could try charging by usage, as with SMS, but that's hard when key competitors are free. They could also try charging for premium features, but that could hurt user growth and it's tricky to find the right basket of features that will really get people to pay.
Is this because digital payments are cumbersome, or are people really unwilling to drop 50 cents/mo on something they find valuable?
Imagine getting 3 months of Snap usage for free, and having the ability to make a 50 cent payment as easy as dropping two quarters in a tip jar. Would this still be a huge barrier to entry?
Hey if they discover it too late, that’s on them!
At their size, there are few changes that will help user growth without improving content.... goood luck with that.
2. Snaps main competitor would have a far lower barrier to entry - free
3. If all your friends can’t pay for Snap, you will likely move regardless if you are a paying customer. Why would I pay for a network with 80% of my friends when I can use a near clone with 100% of my friends.
4. Facebook nearly $7/user a month with an ad model. Ads are fare more lucrative than subscriptions
My problem with any ad model is it incentivises the maximisation of views/engagement that allow for more/stickier ad impressions which means a proliferation of viral/tabloid/divisive content like youtube/snap/facebook. Once that incentive can be minimised, the incentive to provide quality product that users then feel willing to pay for can become more important.
Of course, these networks didn't attract the user numbers they have by charging up front so for any challenger to come along and try this model will be extremely difficult due to the aforementioned friction in either getting out your credit card to pay or paying up front for an app. People will gladly shell out hundreds of dollars for a new phone but won't shell out a fraction of that for a quality app on that phone.
If Snap were to start charging tomorrow, what would their value ad / sales pitch be?
The original reason people used Snap was ephemeral communication with their friends. Snap can't "sell" that. If I buy the Snap App, and my friends aren't there then the app is useless to me. The smaller the network is, the less valuable it is to me - and if I do buy in, it then becomes my job to also convince my friends that Snap is worth is paying for. If one of my friends does not renew their subscription, the value of the service to me also declines. I don't think any social network can be viable by subscription - the most valuable part of a social network is the network, and the under a subscription fee, "Snap" would always have to choose between making the network for valuable and generating revenue.
Thats why the ad model works so well for social networks. The more people you have, the more attractive it is to consumers as well as advertisers. This is different from something like a news publisher - the amount of people also reading from that same publisher doesn't affect my enjoyment of their content.
How valuable are a demographics with no discretionary income to advertisers?
This year I want a [blank] from Santa/father Christmas.....
What makes you so sure? Given that there are basically no successful social networks that charge, I'm very skeptical.
But like many things that start one way for a good reason, that reason is eventually forgotten and the state of the world is codified into a shared social norm. Most people either don't care or are unfavorable to social media sites selling their info, yet I predict the outcry towards their charging would be enormous.
But you need a CC to begin with. What percentage of Snap’s user base has a CC?
I really don't think this is the case. For the demographic that currently uses Snapchats (mostly 18 to 24 year-olds), paying for mobile software at all is a pretty significant behavior change.
But, they're at least succeeding at something that Google couldn't do if their life depended on it, which is make a social thing people want to use.
What I don't get is why Google doesn't just swoop in either at the early stage or at flailing-and-monetization stage, buy them and stick them in their back pocket.
They've made their bones by being a uniquely fun and social way of a certain subset of the population to share their lives without parents dipping their head in and seeing what they're doing, ala Facebook. The UI is designed to generally support this; it is confusing and messy and understandable only by someone who is innately familiar with the app, or unfamiliar with the general conventions of UX.
But what happens when that user base isn't big enough and you have to expand? What happens when you need to figure out how to sell ads in an environment when you have next to no demographic information to target against? You'd have to fundamentally change the business: algorithmic timelines, a more sensible UI, more chipping away at the anonymity - all of which will turn off their core users in droves.