I don't think anyone is debating the popularity of Snapchat.
I think you hit the nail on the head when you said "I think there is legitimate reason to be doubtful about the appeal of these products because they have nothing to do with chatting with friends".
In my opinion, when Snapchat is truly forced to monetize (such as twitter/fb after ipo) it will dillute the core product to the point that people will search for alternatives.
At that point a competitor will get some VC funding after grabbing some users and start the cycle again.
I view this behavior by SV to be just as damaging to the state of the tech industry as housing derivatives were to the housing industry.
I don't buy this scenario. The failure scenario I have in mind is their monetized products fail to catch on, and they are basically like Twitter - no other products that directly compete in that niche, but not a cash cow either. Or WhatsApp - very popular, not a cash cow.
I just view the constantly aging 18-24 year old demographic as the main driver of viral growth these days. As that demographic ages out a new flavor of the week will emerge.
Common misconception: Twitter has actually pretty steadily increased its revenue per user. Their issue is that their user growth has basically plateaued far short of the ubiquitous level they need.
Sure, but the statement that they were unable to monetize the product is incorrect. They have successfully monetized the product. They (so far) have been unable to keep the user base growing at a rate that a public company generally requires.
I know people who have worked at Twitter. Twitter's systems cannot be run, even in maintenance mode, by only a few people on AWS. Not only would Twitter crash / crawl to a halt on AWS, but that's not even enough people.
I think it's more probable that their value will come down from bubbling heights and someone will buy them. To me chat models aren't sustainable without it working in line with your other verticals. It's too hard to monetize. IMO no chat platform can survive without being attached to another product or service; or just a vertical that is similar. Not in the mobile age it's not. There are too many chat apps as it is. FB Messenger, SnapChat, WeChat, Slack, Skype, iMessenger, WhatsApp, Viber, Hangouts, GChat and that's not even all of them. There's no way there is enough market room for all of those. The sector will consolidate and imo will come back to the mean of there being maybe 4 big companies behind them. Really, if I'm Twitter and want to stop my stock from tanking, I get a line of credit and buy SnapChat. It actually makes sense with their model more than any other.
Though I have heard the SnapChat CEO is a bit of an egotistical assclown, so he might ride it out alone until the bitter end. He also despises Microsoft, so that rules out one buyer.
> IMO no chat platform can survive without being attached to another product or service;
I sincerely believe WhatsApp could have survived independently with a $1/yr subscription. They hit a sweet spot of having a 9-digit user base, a small team and not raising crazy amounts of venture capital.
I think paid providers can survive, but not ad backed ones. Skype has a paid offering for example and has a business platform, Hangouts has a business platform integration. Hard to do that with something like SnapChat, if you ask me. Eventually if everyone is collecting data, that data is going to become less valuable per user, so using that for valuation becomes nonsensical.
It's equity value is not all that relevant during a buyout, there are different swap methods, etc. It's not unusual for a company with a smaller market cap to buy a larger one. A lot is to be considered, ebitda, debt, liabilities, cash flow, book value etc. I also said that their valuation will eventually fall. We are in a private equity bubble, but credit is still easy to come by.
I think you hit the nail on the head when you said "I think there is legitimate reason to be doubtful about the appeal of these products because they have nothing to do with chatting with friends".
In my opinion, when Snapchat is truly forced to monetize (such as twitter/fb after ipo) it will dillute the core product to the point that people will search for alternatives.
At that point a competitor will get some VC funding after grabbing some users and start the cycle again.
I view this behavior by SV to be just as damaging to the state of the tech industry as housing derivatives were to the housing industry.