Snapchat CEO predicts Facebook will implode like Yahoo

http://www.businessinsider.com/snapchat-ceo-says-facebook-will-implode-2014-12

by lovelearning • 12 years ago

55 50 12 years ago

striking• 12 years ago

I can't help but agree. Many companies that have explosive growth tend to depend on it. If the growth is explosive enough, they may end up eating their entire market. Now they have no growth (which is okay in some cases but); since they depend on it, they implode.

Either change your business model to use what you already have and optimize your existing assets... or implode.

onion2k• 12 years ago

They've already changed their business model.

So long as Facebook are reasonably astute they have enough assets that they can just buy any competitor that looks promising. Their real challenge isn't remaining relevant to the market themselves any more; it's making sure they're quick enough to buy enough innovative startups so that Google/Apple/etc can't gain too much of the ad market and managing the process of integrating those startups in to the Facebook platform seamlessly.

johladam• 12 years ago

Is it standard practice that, as the CEO of one company and sitting on the board of another, that you use your company email in that regard? The reason why this was leaked was because the CEO of Sony Pictures did not isolate his CEO job and his "part-time" jobs, leading to leaks like this.

smtddr• 12 years ago

I definitely know people who use their company email for things that are not work related. I personally don't do this, but I think a lot of people do.

Circumstances• 12 years ago

Evan Spiegel might have a point in regard to Facebook "imploding" respectively declining in the medium term, although I would have not placed VC sponsored Ad-Money at the top reason.

Personally, I rather see a decrease of "traditional" user engagement as a growing risk for Facebook. I have the feeling that a lot of user attention is currently shifting from Facebook to other services as each FBs user stream seem is becoming ever more non-personal and is nowadays primarily used to push and promote offers and services and semi-public personalities.

That Snapchat on the hand I believe, might have an even higher chance of "imploding" due to its unsure commercial application as well as its probably super change affine / non-loyal users.

wuliwong4• 12 years ago

Someday Facebook will lose it's position at the top, maybe sooner than later. Nobody knows that answer, not even the Snapchat CEO. While Snapchat is an insanely popular app, it isn't profitable. This is a gigantic, difficult step in the process that they may never take. My bet would be on Snapchat's demise preceding Facebook's.

ssharp• 12 years ago

Are marketers really putting blind money on Facebook like they do on other forms of offline advertising -- or they did with online advertising during the first dot-com bubble? Or are they putting up money, measuring their CPAs against LTVs and changing advertising tactics when CPAs get too high? There are lots of choices for online advertisements today and a platform will produce profits as long as the platform produces profits for its advertisers.

Snapchat's CEO clearly disagrees when he says: "VC dollars are being spent on user acquisition despite unknown [lifetime value] of users — a recipe for disaster."

So he's saying people take VC money and invest it in poorly devised advertisement strategies. I'm not familiar enough with VC-backed companies but is this that common? Are Facebook ads, AdSense, etc. just filled with dumb money from VC investments? In my experience, that answer is no, but maybe things are different.

Curiously, I'm wondering how Snapchat is valuing the lifetime value of their own users, considering revenue from their users is zero.

discardorama2• 12 years ago

So he's saying people take VC money and invest it in poorly devised advertisement strategies. I'm not familiar enough with VC-backed companies but is this that common?

This was very common in the last dot-com boom. That time, Yahoo was the beneficiary of the funds. People were blindly throwing money at "internet advertising", without any clue as to whether they were getting any value or not. And VC-backed companies were doing even more so (and buying shitty Superbowl ads....)

wuliwong4• 12 years ago

You are repeating what OP said. He's asking about now, not then.

edkennedy• 12 years ago

Revenue is not zero - they have sponsored posts and now take a percentage of money transfers.

deepinsand• 12 years ago

My interpretation was that the marketers are very savvy at measuring the efficacy of advertising, but they're benchmarking it against an unknown LTV.

As you mention, Snapchat has no way of measuring their own LTV. If they were to do any Facebook advertising, they'd just be shooting in the dark.

lmm• 12 years ago

When I worked in the Facebook advertising space we were definitely tracking "engagement" with our clients' ads. But this was often artificial measures like "clicked like" or "downloaded the app"; we did sometimes measure actual revenue (i.e. "clicked the ad and then bought something at the linked store") but this was less common and many ad campaigns simply weren't set up for that kind of response.

So it's not completely blind, but I suspect many companies are paying for "brand awareness" and "user engagement" - the things they can measure, like the drunk looking for his keys under the streetlight - and maybe haven't fully validated that those translate into real revenue.

nakedrobot2• 12 years ago

This is exactly what the Oculus acquisition is all about and it was a genius move.

spacefight• 12 years ago

We haven't (thank god) started to use a rift for x [min] of time per day on the same scale some uf us use FB.

The use cases and the biz cases for buying/using a rift is imho not yet a given.

lovelearning• 12 years ago

I don't follow. Can you elaborate?

jinushaun• 12 years ago

Facebook is making sure all their eggs are not in one basket.

csmattryder• 12 years ago

Yep, I can see FB staying in the tech game long after their core product has lost interest, due to them buying into emerging technologies.

Yahoo tried it with their Tumblr acquisition (and others), but they seem to buy companies at their peak, rather during their early growth stages.

higherpurpose• 12 years ago

Or maybe they'll run Oculus into the ground, too, much like Yahoo did with dozens of companies it bought for a lot of money, too (Flickr would be one of the more known examples).

wuliwong4• 12 years ago

Not to mention Instagram and WhatsApp. Not the same kind of hardware tech, but certainly diversifying. Facebook, Instagram and WhatsApp are 3 of maybe the top 5 or so apps out there right now.

drzaiusapelord• 12 years ago

Well, this has been Yahoo's strategy as well. Its bought a lot of high profile projects, often good projects, and then it systematically ran them into the ground.

I'm not sure how FB is run internally, but what I know doesn't fill me with confidence. It feels like a bunch of 20 somethings acting as arrogant as possible because of their defacto monopoly on personal social networking. I honestly can't see this culture being good for a hardware company that's expected to continue to be an open source darling and actually ship hardware. Where's FB's track record in hardware? A couple failed phones at best?

Heck, /r/oculus used to this avalanche of futurism and wonderful projects. Now it reads like a lot of press, marketing, and PR pieces. I suspect a lot of the hobbyist goodwill has been burned by the acquisition or just naturally petered out and the interesting people have moved to better things.

Not to mention Sony and MS getting in on the action. Sony has Morpheus and MS is showcasing their VR headset in June. These are devices that'll "just work" with a commodity console as opposed to a specialist device that'll "just not work" without a hefty and expensive gaming machine and an end user without enough tech skills to tie all these disparate elements together.

I think FB smelled blood in the water with Sony and MS eating Oculus's lunch and got them at a very discounted price. Everyone thinks this is some masterful move, but it seems like desperation from all involved. The console juggernauts are just not easy to beat. If they were we'd all be playing iConsole or Facebook's console or the Ouya. Sony and MS have the hardware, the delivery back-end, the online stores, the customers, the exclusive deals, the experience, the branding, and the marketing muscle. What is FB bringing to the table other than cash from its inflated stock?

discardorama2• 12 years ago

The irony here is: Snapchat just took investment _from_ Yahoo[1]. A case of biting the hand that feeds it?

[1] http://www.bbc.com/news/technology-29502069

kornakiewicz• 12 years ago

Why so? The current state of Yahoo is common knowledge.

programminggeek• 12 years ago

I think this overstates the VC backed money that is going into Facebook ads. This also assumes that no other advertisers will come in behind them.

Advertisers go where the eyeballs are. With a billion people connected to Facebook, you have a lot of eyeballs, and thus money. That is not going to change anytime soon.

As long as the people use facebook, it will make money. Almost by default.

pierreio• 12 years ago

Babel metaphor aside, is Spiegel's core argument true?

He believes Facebook's ad revenues are also overdependent on venture-backed startups buying traffic and users

FB's ad portfolio seems too composite to be called startup-dependent. Or is it? I have no data on this.

easytiger• 12 years ago

Depends, are companies selling weight loss pills generally VC backed?

josefresco• 12 years ago

Funny prediction from a CEO of a company with no revenue. At least Facebook has a revenue model to criticize. Evan Spiegel wasn't even 10 years old when Yahoo! was dominate. I wouldn't take this type of meta-business advice from someone with so little experience.

coralreef2• 12 years ago

His hypothesis isn't wrong though. It may be more productive to attack his rationale than his experience.

zanek• 12 years ago

The top comment on BI said exactly what I was thinking. People are acting like this guy is the Oracle of Omaha when he's flying by the seat of his pants with a auto-deleting photo app. Seriously people ?

"Yes, and in his email he seems to believe that his dick pics app is "revolutionizing personal communication". Ok guy."

ProAm• 12 years ago

Well I'd agree but Twitter made it some how (or should I say twttr)

con-templative• 12 years ago

"Yes, and in his email he seems to believe that his dick pics app is "revolutionizing personal communication". Ok guy."

I don't know whether I believe it, but the argument for Snapchat is that it encourages user engagement. So if you're a photographer who wants attention, it's better to have someone's dedicated attention for a few seconds on Snapchat than it is for them to glance it while scrolling through their feed on Facebook.

zamalek• 12 years ago

It doesn't take a genius to realize that Facebook walks a thin line on a daily basis. Many of us may use the platform, but are probably providing less useful data as our trust for it diminishes.

That doesn't mean it's going to implode. Zuckerburg is a ruthless and savvy businessman, with many more years of experience compared to Spiegel. There are a lot of people who are not as savvy as us and Facebook will continue to derive profits from those people.

Snapchat has a very high user engagement but only across a very specific demographic. Even my 80 year old mother uses Facebook, I strongly doubt she would would ever have any interest in Snapchat.

Spiegel would do well to take a few pages out of the elephant's book and put them to use: he's assuming that his own demographic is the only one that exists. The kid has hit a profit mine and now thinks he can predict the future - user engagement is not everything, user retainment counts for something too.

dschiptsov• 12 years ago

You don't have to be Snapchat CEO for that - every empire will turn to dust.)

The law of diminishing returns works equally well for FB or MSFT or NOK (remember that?) or AALP or whatever it is.

wuliwong4• 12 years ago

Kudos to a lot of people in this discussion who have noted that they do not have any real numbers to back up their opinions. It is funny, because the CEO of Snapchat had no numbers but didn't let that stop him! I like that their is a higher level of integrity in an HN discussion than a Business Insider article. :)

coralreef2• 12 years ago

How do you know he doesn't have access to numbers? Just because they weren't included in a leaked email didn't mean he hasn't perhaps seen Facebook's data in some sort of disclosure period or exchange between the two companies.

jim_greco• 12 years ago

It always amazes me the way in which people make up an entire complicated chain of events in their mind to fit their world view. He boils Facebook down to a one note company that could never respond to changes in the market.

Fed stops QE => Tech stocks cool => Less money pours into VC technology => Companies stop buying app install ads => Huge hit in Facebook revenues => Facebook implodes

Ridiculous.

_almosnow2• 12 years ago

What is Fed QE?

Edit: Thanks.

mef• 12 years ago

http://en.wikipedia.org/wiki/Quantitative_easing

tyenl• 12 years ago

Quantitative Easing. Post-2008 Fed initiative to help markets recover.

swalsh• 12 years ago

Everyone has an opinion on Macro-Economics, regardless of their level of knowledge about economics as a whole, it's just that for 99.8% of people their opinions doesn't get much further then the comments box on their favorite website.

IndianAstronaut• 12 years ago

I have always thought that most people commenting on the economy probably do not even know what the GDP of their nation is.

panon• 12 years ago

It's more relevant if you read it here:

https://sg.finance.yahoo.com/news/snapchat-ceo-predicts-face...

Facebook will probably go up and down, but it's here to stay.

bhouston• 12 years ago

I have to agree. I keep looking at these trend lines and it seems very negative for Facebook:

http://www.google.com/trends/explore#q=facebook%2C%20youtube...

Last time I posted the above chart it wasn't as severe but many explained it away people saying it is because Facebook is all mobile now, but so is Google and so is YouTube.

basch• 12 years ago

that means nothing. that could easily be explained away by people using speed dial in their browsers more, or autocomplete in their address bar instead of googling facebook to arrive at facebook.

extc• 12 years ago

It can't mean nothing.

xyby• 12 years ago

Summary: Snapchat CEO says most of Facebooks revenue is overpayed app-install ads. Startups are wasting their money on these ads. But nobody knows if that's true.

cdnsteve• 12 years ago

how can we down vote this, feels like TMZ is on HN?

lazythrowaway• 12 years ago

All I know about Facebook as a direct marketer - we went from spending $3000 a month in June to $400,000 this month alone for one client because the CPA is there (not LTV, just first purchase).

_almosnow2• 12 years ago

You guys are acting as if Evan publicly said those things. Keep in mind that the source of this is a private email exchange. He's not talking bullshit just for the hype of it.

This is something that the guy and his team had obviously put a lot of thought on, and the position they had right now is something that we couldn't even imagine. Yeah, many people can say that they understand how SV works but they don't have Snapchat in their hands. Snapchat is arguably the hottest startup right now and even as some people may disregard it as a "dick picks app", the reality is far from that. Put some rationale into it, this is not another Zynga, Rovio, whatever, this is not a fad; people do not just stop messaging each other and move to "something else", well, they actually do and they may move to Snapchat.

Also they didn't sell out; would you let down $750M in cash if you didn't have a plausible plan to make even more? Come on guys, don't be naive...

kuni-toko-tachi• 12 years ago

The larger issue is the vulnerability of user data. The Sony hack is the state of things to come. As more and more personal data is compromised, faith in services like Facebook and the Internet in general will crater. This doesn't even take into account government use and misuse of such information.

The Internet is growing darker each day and data retention will be a significant liability for years to come.

michaelochurch• 12 years ago

This would be like me saying that LeBron James is off his game. You'd rightly tell me that I'm not a basketball player and don't know what I'm talking about.

Seriously, why is this Joffrey's opinion of any value?

Snapchat CEO predicts Facebook will implode like Yahoo

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