If I Were Snapchat, This is How I Would Monetize the App

Yesterday, Snapchat turned down a $3 billion acquisition offer from Facebook and the Internet went nuts.  Speculation as to why the company turned down such an offer is scattered across the web, from the insane growth the app is experiencing, to hoping to receive an even bigger offer, or even because the company is going to make a go of it on its own.  The super high valuation of Snapchat is currently based on users metrics and potential — potential to generate serious revenues.

Alex Wilhelm at TechCrunch did a nice job of crunching the numbers to see what kind of revenue Snapchat would need to generate in order to sustain its valuation of $3 billion. He found that by comparing Snapchat to Twitter (which just went public) and valued itself upon going public at 34.2 times its 12 month trailing revenue, Snapchat would need to generate $87.7 million in revenue over the course of 12 months to sustain its $3 billion valuation.  Keep in mind Snapchat currently generates no revenue at all.

Now according to one Snapchat investor, who spoke with Mike Isaac of AllThingsD, the “press and hold” action that allows you to view a message, is ripe with potential.  It’s ripe with potential because viewing a snap comes with a much higher probability that you have a user’s attention: “If your thumb is pressed against the screen, it’s very likely that you’re staring at what’s in front of you. That’s the perfect time, then, to serve up an ad,” writes Isaac.

The big potential being that these ads would perform better than the current ads on social networks like Facebook or Twitter which are placed inside the user’s stream, but there is no guarantee those ads will capture a user’s attention (that being said Facebook’s ads are performing quite well as of late).

So is showing ads prior to seeing your friends Snapchat message the best way to monetize? I’d argue no.  I should note I have no details on the company’s roadmap, but if I were Snapchat this is how I would monetize the app: ads, subscriptions, promos/deals.

Ads

Snapchat is fun, therefore ads shown in Snapchat must be fun, especially since a large percentage of the user base is younger.  “Promoted Snaps” would be an obvious way to monetize, but instead of making them appear before someone can view the actual content of the snap, users should be able to choose whether or not to view them.  Part of the fun about Snapchat is that don’t know what you’ll be viewing when you “press and hold” — Snapchat and brands should take advantage of this and use it to create fun content to share in the app.

Subscriptions

Ok, this could be interesting and worth a shot.  Teens (and many people) love celebrities, so why not build a way to subscribe to them for a small monthly fee (like $5 or less) to receive snaps from your favorite celebs.  Get some celebs to sign on to do it and it could be really cool.

Promos/Deals

This idea could be one of my favorites: imagine walking into a store of any kind and receiving a snap from the store with a promo/coupon code or some kind of deal.  There’s a lot of money to be made in that space.  I’d say that’s something that could even scare foursquare.

There you have it, three different revenue streams for Snapchat.  Now, all that being said, I don’t think Snapchat is in any rush to start monetizing or worrying about revenues, especially when people are still willing to throw money in their direction.