Snapchat: A Race For Retinas, Not Revenue (Update 1)
Updated from 9:19 a.m. to provide more analysis about Instagram in the sixth paragraph and comment from Google.
NEW YORK ( TheStreet) -- Facebook
Venture capitalist and noted tech pundit Om Malik tweeted that Google tried to buy Snapchat for $4 billion after word of the Facebook acquisition offer went south, as more people continue to hype up the possibilities of the application, despite the company having no revenue. For now, it's about eyeballs and engagement. Money comes later.
Google declined to comment on the story. Snapchat could not be reached for comment.
Snapchat is growing at an exponential rate, with 350 million users around the world, sending 6 to 10-second clips to their friends and family, in a way that's different from texting, tweeting or posting to Facebook. After the user opens the message, akin to an email, it disappears - something that's very valuable to its users. "I think it'll have a long lasting appeal," says Missy Domenchello, 23, who first started using Snapchat about eleven months ago. "I think it's really private, and that's what's good about it."
This tweet from the Federal Communications Commission says it all about why people are flocking to the service in droves.
"30% of college admissions officers look at applicants online... They loved your GPA, then they saw your tweets..." #CyberSecurityFCCThe FCC (@FCC) November 12, 2013
Talk that Snapchat is garnering the attention of Silicon Valley giants is not new. Facebook tried to purchase the Evan Spiegel-led company for $1 billion last year, and that fell short as well. The social network then went on to build its own version of Snapchat, Poke, which failed miserably.
There's been a lot of chatter that the valuations we're seeing on these private companies are "bubble-like," something I agree with. I've questioned the valuations we've seen on these companies, particularly Pinterest, which recently raised $225 million, giving the company a $3.8 billion valuation. I believe that of all the Internet companies in the Valley right now, Pinterest is the one most likely to live up to its valuation, given its demographic, usage, and appeal for consumers, but that doesn't mean $3.8 billion isn't a lot of money for a company with no revenue right now.
Snapchat's potential business model is harder to see, given the messages disappear after users open them. It's also not an open platform, a la Twitter