You can argue until you're blue in the face whether or not Snapchat is worth the $3 billion Facebook Facebook apparently offered to buy it. But there's little argument over why Facebook CEO Mark Zuckerberg was willing to pay that much for the disappearing-photo-sharing service: It's attracting the teens that Facebook is losing.
At least, that's the conventional wisdom. But here's the problem: If there's anything more ephemeral than Snapchat snaps, it's teen attention spans. Today, Snapchat looks unbeatable, at least for what still seems like a rather narrow slice of social activity. But there's no reason to think that teens will stick with most any app or service for long-all the less so when it seems that there's a new hot social networking app every month or so these days.
So I'm betting Zuckerberg is a little smarter than that. What he really wants more than just a surge of new teen blood-as he also showed with his $1 billion purchase of Instagram-is to make sure that Facebook owns the most popular and compelling kinds of social networking as they develop. Snapchat clearly appeals to those who want to exchange bits of themselves in a more ephemeral way than they do on Facebook.
What's more, despite widespread doubts about whether Snapchat can make any money, Zuckerberg, or at least Facebook COO Sheryl Sandberg, surely sees the potential there. Look, ads are about as ephemeral a piece of content as it gets, so flashing a branded photo or short video seems like a no-brainer. Check out at what Taco Bell and Karmaloop have already done on Snapchat even before it has created any ad formats. Ads may not even be the main moneymaker, either. Companies such as WeChat in China suggest that Snapchat could make a lot of money from virtual goods such as stickers, says Jeremy Liew of Lightspeed Venture Partners, an investor in Snapchat.
What I'm not sure about, since I'm not a user of Snapchat-few if any of my friends are, so what would be the point?-is whether Snapchat has legs. Nobody really knows whether Snapchat is the next great communications medium or the next CB radio, or for you somewhat younger folks, the next MySpace.
Zuckerberg clearly is betting Snapchat has some lasting appeal. But given the rapid proliferation of social networking services in just the last few years-Instagram, WeChat, Vine, Whatsapp, Tumblr-it's reasonable to assume that another shiny new social object could supplant Snapchat next year. As Altimeter Group principal analyst Brian Solis told CNET, 'If we've learned one thing, it's that no service is infallible and users are finicky. Snapchat is the next Snapchat until whatever is next comes up and starts to displace Snapchat - just like Snapchat emerged out of nowhere and rivaled Instagram because it was just a new and different way to share pictures. At some point that's going to happen again.'
That's exactly why Zuckerberg likely will have to keep offering up big bucks to stay relevant to each new generation of social network users. But it's also why he will have to be careful. Spending big bucks just to get young audiences is a loser's game. The real win will be acquiring services and apps that may appeal to young people but keep appealing to them as they age. After all, Facebook itself thrived not just because college students thought it was cool, but because it eventually provided basic utility for people of all ages.
In rejecting Facebook's stunning offer, or in fact any new investment until next year, Snapchat's crafty CEO Evan Spiegel and his other VC backer Benchmark Capital seem to realize they have to prove they're more like, well, Facebook. If they can, it won't be surprising to see Zuckerberg up his offer once again. And if they can't? Well, at 23, Spiegel will have a lot of time to ponder what he might have done with all that money.
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