Facebook, desperately attempting to lure the teenagers it needs for its future, has offered a staggering $3 billion to snap up their favorite app, Snapchat. The buy-out offer was rejected. The crazy thing about Snapchat is that it doesn’t make any money. Yet. It was only founded two years ago and already has 350 million users per day. That might be a drop in the ocean to the mighty global reach of Facebook, with its 1.2 billion. But Snapchat has what Facebook wants. The teenagers.
So what is Snapchat? Basically, it is an ephemeral idea. You send a photo or video and it disappears. There is an inbuilt detonator which expires somewhere between one and 10 seconds. These are the “snaps.” The app works on iOS and Android devices. It was a couple of Design students at Stanford who thought of it, Evan Spiegel and Bobby Murphy. Speigel was speaking to a friend who really regretted a photo he had sent. This was his lightbulb moment. He began the company in September 2011, dropping out of class to do so. It is now one of the top ten iTunes apps.
The 13 to 25 year olds, the market that have turned away from Facebook, cannot get enough of Snapchat. They love it. Facebook has become too mainstream for them, inundated with parents and relatives, and the instantaneous nature of Snapchat appeals to their sense of living for the moment. For these young people, it’s the distance from Facebook that makes sending snaps so appealing. They can be as candid, as silly, as outrageous as they like, and there is no danger of recrimination. Snapchats will evaporate, they don’t stick around to humiliate you. This makes them a place to push the boundaries, to have a lot of fun, to feel safe from prying eyes.
On the other hand, this also creates potential for inappropriateness, and danger. The hazards of sexting and bullying have been reported in relation to the popular app. This has been offset, to date, by the vanishing act of the snaps, but Snapchat have just introduced a new feature, Snapchat Stories. These will last a little longer, 24 hours, and allow the linking of photos and videos. In addition, they have started a service for even younger kids, Snapkidz. Under 13s will be able to draw pictures and take snaps but not to send them.
One of the great underlying mysteries about Facebook’s juicy acquisition offer is why it wants to spend £3 billion on a social messaging site that makes no money. When it paid $1 billion for Instagram it immediately got an extra 55 million uploads a day. Instagram is now five times bigger than when Facebook bought it out in 2012. Experts presume that it sees similar success story waiting in the wings with Snapchat.
For now, Snapchat has no revenues although it has attracted a fair share of investors. It doesn’t sell advertising and it doesn’t charge its users. It has no sales plan, no business model. What it has in spades is numbers. From June this year to September, it grew from 200 million to 350 million. If it carries on on this trajectory, it could have a phenomenal following. And they are all in that key demographic – the next generation.
Facebook knows all too well that it has failed to reach out to the teens. They are not chatting on Facebook. The irony is that if Facebook did take over Snapchat it would spoilt the very secrecy at the heart of its allure. This could well be the reason that Speigel and Murphy felt confident enough to say “No thanks” to Zuckerberg for his over-generous offer. They have got something unique and they want to keep it that way.
Besides, with an audience of that size (and growing), Snapchat has the potential to start to make money, even if it does not go down the conventional route of banner ads. The Snapchatters have shared 15 billion images between them since January 2012. That’s a lot of traffic and a whopping potential for going viral. Analysts predict that Speigel may go for a different revenue generating idea. Perhaps targeted marketing, with messages aimed directly at the youth.
Facebook have never offered this much before, which shows how much they want the Snapchat community. According to the Wall Street Journal, although Snapchat is loss-making, it is valued at around $4 bn. Evan Spiegel has decided to wait it out until next Spring to see how much it grows and then he may court other offers. Facebook looks like it will have to wait for springtime to come a-wooing again and try to snap up Snapchat.
Meanwhile the teenagers are saying goodbye to Facebook in droves, and Facebook has admitted it. It is a curious anomaly that it is almost a victim of its own success in driving the young away, by becoming so accessible to so many. No kid really wants to be “friends’ with their parents, not least on Facebook. They’re your parents! Now that they all have mobile phones, it is so much easier, and more discrete, to use apps and leave the old communication pathways behind. WhatsApp, another favorite of teens, is said to have lost $23 bn in SMS revenue in 2012. Why pay to message when it’s free on WhatsApp? WhatsApp, like Snapchat, has 350 million users. To put that into context, Twitter has only 218 million. The teens are taking over. 78% of teens will plan a social event with mobile messaging, and not on Facebook.
Some commentators have suggested that Facebook are anxious to get hold of Snapchat for biometric facial recognition purposes, which they could run the algorithms on, even in the time before the Snapchat disappeared. Others are more cynical and suspect that the Snapchats do not, in fact, disappear without trace.
Will Facebook eventually snap up Snapchat as they have with Instagram? And will that all-important teen market follow them there if they do?
By Kate Henderson