I finally watched the Steve Jobs movie on a flight to California (most appropriately). Just before read through a Facebook comment thread to a blog post that my friend and Zula colleague Hillel Fuld wrote on the noise surrounding the supposed acquisition offers that Snapchat founders have turned down ($3 billion from Facebook, $4 billion from Google, but whats a billion amongst lunatics)(and yes, I am lunatic too, anyone working in industry is certifiable). Back to Jobs -- what he was about was radical innovation. That is what inspired him -- to use technology to move people. Change how they look at the world. And yes, in an extremely well designed and sexy wrapper.
I am not going to get into whether or not Snapchat is worth $3 or $4 billion. When ever I am asked about the value of a company (including my own) I always say a company is worth what somebody is willing to pay. There is no objective value in our business (tech start-ups).
What Snapchat does have right now is sex appeal -- and that is more valuable than a certain amount of users, business model, or defendable technology. Snapchat in particular has no technology (unless you think disappearing ink is "technology"). They do have have a "certain amount of users" (love quoting myself) but all that is vastly overshadowed by their current sex appeal -- and they are probably at their height of sexiness. And that, more than anything, is what Zuckerberg and friends are starting to lose. You see, when Mark Zuckerberg started Facebook he had sex appeal in spades (of a geeky, techy sort). In fact, Facebook got its start trading on sex appeal, which is what initial profiles and usage was all about on college campuses.
Now Facebook has become, shudder the thought, a boring profitable, successful long-term company, with quarterly earnings, board meetings, strategy. Yup, sounds a lot like IBM. And that is not the rep Zuck wants...he wants to still be the 23 year old phenom with the new shiny thing everybody wants to touch, to own.
Google long ago became part of the fabric of the web, as have Amazon, and a few other user-known companies, along with a whole set of lesser known companies that make up the infrastructure of what most people think of when thinking about the Internet. And at least in the Western world, the internet has become for most of us part of our lives, much the same way other "technology" companies developed into core utility elements. Some of them started out as owned by the public (even in capitalistic societies such as America). Think Ma Bell, for those of you old enough to remember the original government owned and operated phone company. It was like the mail -- boring service that simply worked and was there. You paid something for it, but you didn't really know if it was profitable or exactly how it worked. Similar to how electrical power is still supplied in many markets, tightly controlled by the governments (which will change, but not the subject right now).
Utility companies were even traded on stock exchanges -- you didn't buy the stock so much for appreciation as for dividends, dependable, like municipal bonds.
But utilities, infrastructure companies, are inherently boring. Lots of money flowing around, but not sexy. If you can figure out how to siphon off some of that money, you might be able to buy your way into sexiness, or pay people to tell you are sexy -- but the underlying asset -- boring.
Facebook is slowly turning into just that -- infrastructure. When at Zula we needed to decide on two possibilities for signing on (using your credentials from third party to automatically create a Zula account for you) we chose Facebook and Google. We made the assumption that almost 100% of our potential users would have an account with at least one of those companies -- we are looking at them (Facebook and Google) as providing a utility to us, the new sexy guys.
Without Intel none of what we consider the Internet would be possible, but nobody would call Intel sexy. Dependable, solid, smart, thoughtful, yes. But not sexy. And their stock price reflects that lack of sex appeal.
I am not going to get into whether or not Snapchat is worth $3 or $4 billion. When ever I am asked about the value of a company (including my own) I always say a company is worth what somebody is willing to pay. There is no objective value in our business (tech start-ups).
What Snapchat does have right now is sex appeal -- and that is more valuable than a certain amount of users, business model, or defendable technology. Snapchat in particular has no technology (unless you think disappearing ink is "technology"). They do have have a "certain amount of users" (love quoting myself) but all that is vastly overshadowed by their current sex appeal -- and they are probably at their height of sexiness. And that, more than anything, is what Zuckerberg and friends are starting to lose. You see, when Mark Zuckerberg started Facebook he had sex appeal in spades (of a geeky, techy sort). In fact, Facebook got its start trading on sex appeal, which is what initial profiles and usage was all about on college campuses.
Now Facebook has become, shudder the thought, a boring profitable, successful long-term company, with quarterly earnings, board meetings, strategy. Yup, sounds a lot like IBM. And that is not the rep Zuck wants...he wants to still be the 23 year old phenom with the new shiny thing everybody wants to touch, to own.
Google long ago became part of the fabric of the web, as have Amazon, and a few other user-known companies, along with a whole set of lesser known companies that make up the infrastructure of what most people think of when thinking about the Internet. And at least in the Western world, the internet has become for most of us part of our lives, much the same way other "technology" companies developed into core utility elements. Some of them started out as owned by the public (even in capitalistic societies such as America). Think Ma Bell, for those of you old enough to remember the original government owned and operated phone company. It was like the mail -- boring service that simply worked and was there. You paid something for it, but you didn't really know if it was profitable or exactly how it worked. Similar to how electrical power is still supplied in many markets, tightly controlled by the governments (which will change, but not the subject right now).
Utility companies were even traded on stock exchanges -- you didn't buy the stock so much for appreciation as for dividends, dependable, like municipal bonds.
But utilities, infrastructure companies, are inherently boring. Lots of money flowing around, but not sexy. If you can figure out how to siphon off some of that money, you might be able to buy your way into sexiness, or pay people to tell you are sexy -- but the underlying asset -- boring.
Facebook is slowly turning into just that -- infrastructure. When at Zula we needed to decide on two possibilities for signing on (using your credentials from third party to automatically create a Zula account for you) we chose Facebook and Google. We made the assumption that almost 100% of our potential users would have an account with at least one of those companies -- we are looking at them (Facebook and Google) as providing a utility to us, the new sexy guys.
Without Intel none of what we consider the Internet would be possible, but nobody would call Intel sexy. Dependable, solid, smart, thoughtful, yes. But not sexy. And their stock price reflects that lack of sex appeal.
So now back to the Snapchat debate. Bottom line: people are prepared to pay a lot for sex. And sex appeal is one degree removed. Snapchat has it, Facebook is losing it, Google lost long ago (and to be clear -- I love Google and constantly praise them, and I actually think they are sexy, just in the public eye they are...Google).
Do I think Snapchat founders should sell to one of the "utility" players? Well, if Snapchat thinks that they too will become a core part of the fabric of the Web, and they want to be running the company when that happens then no, they shouldn't sell. I personally don't see Snapchat having what it takes to go the distance, but companies also evolve. Perhaps they will...but during that journey they will need to develop business model, start generating revenue, deliver a return on investment -- in other words, grow up and become a boring company. My recommendation to Snapchat founders: sell when you can. You will not be sexy forever.
