According to Laureate BVI, Snapchat made a terrible mistake not taking Facebook’s (FB) offer of US$3 billion, there are less than a handful of companies that have the cash to make such a purchase.
Beverly Hills, CA -- (SBWIRE) -- 02/24/2014 -- According to Laureate BVI, there are only a few companies in the world that can integrate a product such as Snapchat. Now that Snapchat has rejected Facebook’s US$3 billion offer the only companies left with that kind of cash are China’s Tencent (0700:HK) and Google (GOOG).
“The options for Snapchat are very limited due to the implied value of this firm. Their ambitions are probably to go public like Twitter (TWTR), GOOGLE (GOOG) or Facebook (FB) but the biggest hurdle this company is facing is it’s monetization model. Wall Street is skittish about bringing another Twitter to market and Snapchat doesn’t offer nearly as much content as Twitter. Snapchat is a great idea with a wide fan base of young uesers but no profits” according to Laureate BVI CEO Peter Tasca.
Tasca further states, "Choosing the right mobile monetization model is critical to the success of Snapchat. Look at Twitter, they offer content from the Financial Times to Bill Gates and George Soros and they still can’t make money, Snapchat has yet to demonstrate a profitable business plan.”
It is reported that Tencent was an undisclosed minority participant in the Snapchat’s $60 million round led by Institutional Venture Partners.
Tencent CEO Pony Ma has stated, that he wants to internationalize China’s consumer internet companies, in the same way that the country’s manufacturing serves the world.
Tasca states, “I believe that Tencent will learn from Snapchat but will not buy the company. The technology is easily duplicated and there are other apps offering similar services.”
There is a flawed logic that teens are a major force behind internet companies. “Teens are better at picking fads, look at what happened to MySpace,” according to Tasca.
Laureate reports that Snapchat currently has 350 million photos shared every day and over 400 million messages sent. If they can monetize this App it could be a gold mine for marketers but companies like Taco Bell are using Snapchat to communicate with customers for free.
The future of Snapchat is unclear, the Pew research centre claimed that 9% of American mobile owners were using Sanpchat which would suggest about 26 million users.
Analytics firm Onavo reported that Snapchat is being used by 20.8% of iPhone in the US, making it the 8th most popular app on Apple’s iOS.
Laureate states, Snapchat has strong user and subscriber numbers but so does Twitter, just because you have an App people use does not mean you can make money, no one is asking the customers what they are willing to pay.
Josh Elman, a principal at Greylock Partners wrote, he looks for broad appeal, increasing user engagement, sustainable growth and monetizable behavior. I would argue that Snapchat fits the first three criteria while the last is still an open question.
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