Saturday, February 9, 2013

Snapchat Fills the Facebook Gap and Silicon Valley Invests in Privacy

Imagine a world where companies listed on the stock exchange didn’t make any money at all, but investors bought and sold according to the companies’ popularity. A monetary value would be attached to non-tangibles and creativity would be directly rewarded for its own sake. Nothing would have to be bought or sold; it would just have to be created, requiring investment.

It’s not such a wild idea. Snapchat, an app that lets you share photos and videos for a couple of seconds before they self-destruct, attracted the attention of Silicon Valley investors after its popularity started going through the roof. It was created 2 years ago by Evan Spiegel, 22, and Bobby Murphy, 24, from Venice Beach, responding to a need they saw for better privacy, especially in their own age bracket and younger. The app now has 60 million users a month, most of them between the ages of 13 and 25.

Users see it as a way to be more real with friends – which of course includes sexting, but that isn’t its exclusive use. This is really about a younger generation wanting to be able to express itself freely but valuing its privacy above everything else. And it’s about investors rewarding creativity for its own sake, not requiring the artist to sell their product. Not much different from artists getting sponsorship just to produce art. Except that Snapchat’s value isn’t tangible.

A successful entrepreneur and investor, Scott. D. Cook, founder of Intuit, put his weight behind Snapchat, valuing it at $60 - $70 million – without it having made a cent and not even really having a capacity for making money – which resulted in Snapchat raising $13.5 million recently for development.  

Unfortunately, as Dominique Mosbergen points out in, it’s really easy to take a screenshot of images and videos before they disappear, without the original sender being aware, so its privacy isn’t really privacy after all, but it is a notch better than Facebook. When Katie Notopoulos asked the founder Evan Spiegel about this vulnerability, he said, rather cryptically, “The people who most enjoy using Snapchat are those who embrace the spirit and intent of the service. There will always be ways to reverse engineer technology products — but that spoils the fun!” (Buzzfeed)

Snapchat has moved in where Facebook failed, by recognizing the most important thing to users – privacy - and finding a way to capitalize on it without compromising it. So far, anyway. It will take a creative investor to understand where the real value lies and that they also need to join in the creativity and find a way to create profit without destroying the most important component. It’s hard to imagine that investors will be that creative. They seem hard-wired and utterly insensitive to where real value lies. Advertising seems to be all they know as a means of creating revenue. 

But it’s not really working on Facebook, and in any case, advertising is finite; there’s only so much space on a page and people either get inured to it or they get annoyed and stop opening up that page.
Whether what’s happening with Snapchat is really creativity being valued for its own sake is hard to say. All successful companies have an eye on Wall Street, and even though most trading does seem to be controlled by prediction, to think that pure speculation based on popularity but no income stream is enough to trade off is kind of like science fiction. 

Some kind of change is in the wind, though. Snapchat has competitors, including Poke on Facebook, all a response to market demands. Maybe individuals and companies will find it harder and harder to earn megabucks in an advertising-saturated world; maybe eventually they’ll run out of options, particularly as people become better informed and demand what’s important to them. Maybe founders of apps like Snapchat won’t enjoy the idea of world dominance, like Mark Zuckerberg did, and kill their own birthchild.

Frankly, I’ve never understood why anybody would want to have so much financial power. What on earth can a single person do with it? Absolutely nothing. How many cars can you drive, how many houses can you live in at one time? How many places can you fly to in a year? How much stimulation can you take in?

That lust for more and more is a beast. Eventually you run out of ways to feed it. I think the world would be a much more peaceful and better place if these giant corps and super-wealthy individuals were brought down to earth a bit. And imagine a world where you weren’t besieged by advertising at every turn.