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Before I make a product-driven case for Snap Inc. achieving a $100 billion market cap by 2020, I should note that I\u2019ve been a Snapchat bear for much of the company\u2019s existence. That guy at the water cooler scoffing at Evan Spiegel for turning down Facebook\u2019s $3 billion acquisition offer and complaining that the Snapchat app violates every principle of user-centric design?<\/p>\n
Guilty.<\/p>\n
In fairness to Snapchat, it didn\u2019t take long for observers to understand the potential of ephemeral, visual messaging to disrupt the hyper-curated and invasive world of social media, along with the unsecure and, well, boring experience provided by SMS and vanilla messaging apps. The core Snapchat experience offers three advantages over competing mediums for digital interaction:<\/p>\n
As someone who experiences mild anxiety whenever I post a photo on Instagram or Facebook (\u201cbut will it get likes?\u201d) despite my nominal status as a mature adult, Snapchat has been a game-changer. I feel less inhibited in sharing everyday moments with close friends, or reaching out to folks I haven\u2019t seen in a while when I spot something quirky in the world that is relevant to them.<\/p>\n
When you sum these disinhibitions, you have a medium for interaction that helps users communicate more, and better reflects who we are. When you sum a set of engaged and authentic users, you have a network effect that can easily withstand half-hearted attempts to puncture it (i.e. Facebook\u2019s Poke).<\/p>\n
Snapchat has built on the core experience created by ephemeral messages and Stories with features like video and group chat that bring the platform to parity with other social apps. These features are defensive by design, and though they may staunch user attrition at the margin, they aren\u2019t a reason anyone comes to Snapchat.<\/p>\n
The only<\/em> moat shielding Snapchat\u2019s core experience from replication by motivated competitors is its network of engaged users \u2014 and there are legitimate concerns about the depth of that moat. Snapchat\u2019s ephemerality is its greatest strength, but also its Achilles heel: Without user-generated content (UGC) that persists, the app lacks the intrinsic inertia that keeps users engaged with products like Facebook, even if they are less than satisfied with the user experience.<\/p>\n Of course, this is a deep enough moat to box out just about every new entrant \u2014 except the one that matters: Facebook.<\/p>\n Snapchat bears<\/a> have been singularly focused on a key correlation since Snap released its S-1: the introduction of Instagram Stories and a sharp drop in Snapchat\u2019s growth rate in daily active users (DAUs), which both occurred in Q4 2016. There are other worrying indicators: For example, power users of both platforms have reported<\/a> that comparable Stories get more engagement on Instagram than on Snapchat.<\/p>\n I believe the other issues commonly pointed out by Snap bears are critical in a tactical sense, but strategically irrelevant. Snap\u2019s $2 billion commitment to Google Cloud? Not a problem \u2014 if they can keep growing. If you believe in the competency of Snap\u2019s executive team in managing the pace of their roadmap and burn \u2014 by no means a trivial question, to be clear \u2014 it seems reasonable to put these considerations aside when taking a fundamental, long-term view on Snap\u2019s potential.<\/p>\n This is the only question that matters: Can Snapchat produce defensible growth in active users and increased engagement, which is a proxy for addressable revenue per user? What valuable experiences can they create for users that Facebook will have a hard time copying? The best way of approaching the question of long-term value is stepping back from short-term trends and thinking about the Snapchat product roadmap.<\/p>\n Snapchat brought authenticity, expressiveness and fun to our interactions with each other. I believe that their path to a $100 billion market cap involves applying that core set of values to our interactions with everything else: Snap will become the leading platform for augmented reality experiences.<\/p>\n At a high level, AR features are authentic<\/em> because they are only visible to folks \u201cin the know,\u201d expressive<\/em> because they create a brand new channel for interacting with the world and playful <\/em>by making the mundane interesting. Unlike the ephemeral content produced by interaction between users, Snapchat AR content could become a permanent fixture in the world around us, affording Snap with the UGC moat it needs to grow to its full potential without hemorrhaging users to competitors.<\/p>\n You only need to read one paragraph in Snapchat\u2019s S-1 to find support for this view:<\/p>\n We believe that the camera screen will be the starting point for most products on smartphones. This is because images created by smartphone cameras contain more context and richer information than other forms of input like text entered on a keyboard. This means that we are willing to take risks in an attempt to create innovative and different camera products that are better able to reflect and improve our life experiences.<\/p>\n<\/blockquote>\n Translation: Competing with Instagram, SMS, Messenger and other social platforms is only the beginning. Snapchat wants to connect brands searching for a pristine and novel customer engagement channel with consumers who seek \u201cimproved,\u201d richer experiences.<\/p>\n My guess is that Snapchat will eventually attempt an end-to-end lockup of the space by launching sophisticated AR hardware; Spectacles were a successful dry run for this strategy \u2014 but for the next three years, they will follow a platform-agnostic approach and focus entirely on creating augmented reality experiences and content that is compelling on smartphones.<\/p>\n Indeed, $100 billion is a big number \u2014 a larger market capitalization than Tesla, Netflix or General Motors today.<\/p>\n Right now, Facebook has a forward revenue multiple of 9.5x off estimated 2017 revenue. Let\u2019s simplify and say that for Snapchat to comfortably achieve a $100 billion valuation by 2020, we need to believe that it will earn ~$10 billion in 2020 revenue. This could mean 250 million users who each generate average revenue of $10 per quarter.<\/p>\n This is a high bar, considering that Snapchat\u2019s average revenue per daily active user (ARPDAU) currently hovers around $1 per quarter. Can we imagine a product roadmap that builds on Snapchat\u2019s strengths to drive engagement and hit that ARPU benchmark? Here are a few ideas:<\/p>\n These calculations are based on public data and should be considered directional in nature, but the key contention stands: If Snap successfully launches one or more of these AR products, or others that are beyond my imagination, a $10 quarterly ARPU and a $100 billion valuation doesn\u2019t seem quite as far-fetched.<\/p>\n If you believe the following three propositions, you should consider taking a long position on Snap:<\/p>\n With this post, I\u2019ve done my best to build the case for propositions one and two. Is investing in Snap still a tremendous act of faith in Evan Spiegel and CTO Bobby Murphy? Absolutely \u2014 especially given their control of the company.<\/p>\n But if we put aside short-term volatility and focus instead on viable paths for Snapchat to extend its core appeal to users with products that unlock a new frontier of interaction, it becomes apparent that there is tremendous value yet to be unlocked by Snap Inc.<\/p>\n <\/p>\n Featured Image: Bryce Durbin\/TechCrunch<\/small><\/p>\n Article source: http:\/\/feedproxy.google.com\/~r\/techcrunch\/social\/~3\/9i6DyI13cNI\/<\/p>","protected":false},"excerpt":{"rendered":" Before I make a product-driven case for Snap Inc. achieving a $100 billion market cap by 2020, I should note that I\u2019ve been a Snapchat bear for much of the <\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[3],"tags":[10,7,14,15,6,12,11],"class_list":["post-3589","post","type-post","status-publish","format-standard","hentry","category-latest-update","tag-computer-news","tag-downloads","tag-microsoft-download-news","tag-networking-updates","tag-technology-update","tag-wordpress-plugin-download","tag-wordpress-theme-download"],"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\tSnapchat tomorrow: Constructing a deeper moat through augmented reality<\/h2>\n
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Roadmap to $100 billion<\/h2>\n
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The bottom line<\/h2>\n
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