Benner on Tech: Is Snapchat MySpace?

Katie Benner is a Bloomberg View columnist who writes about technology, innovation, and the cult and culture of Silicon Valley. She lives in San Francisco.
Read More.
a | A

People are Talking About…

Snapchat is reportedly trying to convince investors that it’s worth up to $19 billion. There are lots of market-driven reasons why the company might succeed, which I’ll mention further down. But first, before all the late-stage, last-one-in investors open up their wallets, let’s consider that Snapchat could be the MySpace of mobile social networking.

The company has the right idea -- no one wants all of their messages to live forever. It’s won over the kids that marketers want so very much to reach. Snapchatters are mostly between the ages of 13 and 25. (Even early on, founder Evan Spiegel knew his audience.) There are rumors that the site has between 100 million and 200 million monthly users, which makes it almost as big as Twitter. Oh, and it’s only four years old.

But Snapchat, the app, is sort of a mess. It’s not all that intuitive. I’m not just saying that because I’m well outside the target demographic (young and comfortable with the idea that disappearing messages don’t disappear). This has been confirmed by the actual young people who patiently walked me through the app, and by Re/code’s fairly entertaining Snapchat primer. As Snapchat builds out more features on top of this interface -- such as Discover -- the service gets busier and more complicated.

It’s not as easy to figure out as Instagram or a messaging service like WhatsApp. Anonymous messaging apps such as Yik Yak (disappearing messaging’s sociopathic cousin) are easier to use, too. But none of these services can do what Snapchat does -- seem to make our messages disappear. And so Snapchat has carved out a first-mover position in a hot mobile area.

That brings me back to MySpace, which was by some measures the most visited website in the U.S. after existing for only three short years. It was a weird, loud, cluttered site with annoying pop-ups and distractions, but it was popular and fun. What could go wrong? When MySpace was at the top of its game, Facebook opened up its clean, simple, comparatively easy-to-use site to all. And, well, you know the rest.  

Now back to Snapchat’s fundraising rumors. Bloomberg says that it wants to raise up to $500 million at a valuation of up to $19 billion. Investors have been more than happy to pump money into late-stage private companies like Snapchat, especially when they think they’ve identified the winner in the category, such as Uber (valued at $41 billion) and Xiaomi (valued at $45 billion). Investors including mutual funds and hedge funds are trying to capture some upside growth while startups are still private. The law firm Fenwick & West said that last quarter Silicon Valley startups raised money at higher valuations: The average price increased by 115 percent, compared to 79 percent the quarter before.

Sure, the chances that Snapchat can get what it wants from investors are good, but that doesn't mean that it's a good idea.

Related: Evan Spiegel dated Taylor Swift, and now he’s rumored to be weighing a bid for her record label.

Ventureland

Xiaomi was the top smartphone vendor in China last year, beating out Samsung, TechCrunch reports.

This man traded in his car for Uber and Lyft, saved a lot of money and blogged about it.

Companies

Alibaba…

Hedge funds dumped the stock last quarter, Reuters reports.

Amazon…

The company’s one-hour delivery service is live in Manhattan, TechCrunch reports.

Apple…

Apple Pay has run into trouble in China, MarketWatch reports. Apple Insider says that the company has a patent for virtual-reality technology. And John Gruber at Daring Fireball thinks that most of the revenue from the Apple Watch will come from the ultra-expensive gold Edition model.

Facebook…

The company is making a virtual-reality version of its apps, according to the Verge.

Google…

Russia’s biggest search engine, Yandex, wants the country’s regulators to investigate Google for violating antitrust laws, reports Tech.eu. The company’s private equity arm, Google Capital, wants to do more deals in India, the Wall Street Journal reports.

IBM…

The company says it will spend $1 billion over the next five years to develop software storage, VentureBeat reports.

Twitter…

Two unnamed companies are supporting Twitter in fight with the government over “gag orders” that prohibit it from revealing information about data requests, reports the Hill

Media Files

The latest episode of "Modern Family" takes place only on the screen of an Apple laptop, the Verge reports.

News and Notes

The largest change to HTTP since 1999 has hit, with the finalization of HTTP/2, which is moving toward being fully standardized, the Next Web reports.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.