When a company like snapchat is looking for 4B in addition to existing funding I am left completely dumbfounded.
Can someone please explain why they would need this much cash?
My life is AR. I'm the CEO for an AR company, I speak write and live and breathe all things AR.
Snapchat is poised to be the most important AR company around for several reasons. 1. They have a MASSIVE userbase that is comfortable with sharing their lives 2. That userbase has already shown an interest in AR - and yes whether you like it or not their filters are on the AR spectrum - the filters system maps, tracks (SLAM) and modifies in real time.
Their Spectacles release has the potential to build the largest real world image dataset on the planet - something needed (for reasons I won't go into) for AR everywhere. Think on the order of 1.8 Billion images per month with depth data from the stereo cameras (30FPS * 10 sec snap * estimated 20 snaps per day * estimate 100k spectacles users in first month).
Most people have no clue what is going on in the AR world, and I can tell you Snapchat is going to be formidable. If they can invest in a VRD, then they could win the whole AR market, but they need to raise more than 4BN to do that probably.
Having an enormous, religiously active user base has proven time and time again to be a huge cash cow.
(for every $1 twitter make, it spends $2, so their accounting is deep in the negative. But if they fire half the people (who are useless anyway) and stop spending money like madmen, they'll be positive, VERY POSITIVE. thanks to advertising revenues.)
Guess Google can swoop in and buy it now :)
Don't know about Facebook (never been) but I keep hearing about this fabled Google Ad business and honestly, not only I can't recall the last time I even noticed one, needless to say have never even clicked on one. Some interested party wants to keep these surveillance cum social networks afloat and the fairy ad business model and overblown evaluations and VC cash is the front for funding them.
The one that makes 19 billion dollars per quarter?
No one will put up with virtual ads in AR.
The filters are also interesting because they involve user choice: the ads are not unsolicited; rather, they are picked by the users. That's pretty interesting.
We've had in-game advertising in video games for a while; certain games that mimic realistic urban environments lend themselves well to this. In some settings, AR could include a density of advertising -- passive or interactive -- similar to the real world without much trouble. In fact, an AR setting devoid of any commercial presence may be unsettling on its own.
[1] https://medium.com/comms-planning/11-branded-snapchat-filter...
[2] http://digiday.com/brands/inside-gatorades-digital-ad-playbo...
I'm going to use it to block IRL advertising, not replace it.
Occasionally I'll watch an NHL hockey game and on certain broadcasts I started to notice large banners on the glass behind the goals and thought to myself, "Boy, you pay for seats that close to the ice and you're looking at the back of a banner ad?"
When I noticed the ad changed during the broadcast I realized that it was a virtual projection for the TV audience[0] -- a sort of AR in its own right, since it appears so seamless that I originally thought it was part of the rink.
[0] http://www.sportvision.com/hockey/virtual-advertisements
I can't help but feel they are signalling their intent to be an eye into my private life, not unlike the monitoring predicted in 1984.
Snap probably has a winner here if their users will further embrace the idea of turning cameras away from their faces and onto their friends and experiences. How big an "if" that is, I can't yet say.
Which people currently PAY for the privilege of doing. I agree that the face feels a little more identity-usurping though.
The real question is "do all these companies buying ads actually make a return on investment" and the answer is DOESN'T MATTER! Lots of ad dollars still to move away from older methods into digital media lol
Maybe there will be a Netflix documentary in the year 2027 about what caused the burst of the collateralized ad market and financial crises of the roaring 20s, with the undertone of "why didn't anybody see this coming"
but in 2017, that absolutely does not matter.
Source: http://www.bloomberg.com/news/articles/2016-05-26/snapchat-r...
yeah they're extrapolating to do 4x of this year's theoretical revenue numbers in 2017
I'm not even mad, this is amazing
Naysaying Snap is fine, but not if your argument is "bullshit hype".
GoPros are a convenient, high-quality, expandable memory camera that creates a regular video file as big as the storage space available that you can use however you want.
Spectacles are a convenient, unknown quality camera creating a ten-second video that requires smartphone interaction, is designed to be on your face, and is tied to one specific (albeit popular) platform.
Aside from both being able to take video and being easy enough to carry around, the products and the target markets don't intersect perfectly, so it's hard to predict one's success from the other.
This is certainly no predictor of absolute success, just an element of understanding the potential market.
I really dislike the asymmetry between the ability to take pictures of anyone in public easily (assuming spectacles or an equivalent comes out), with low chance of detection (unlike cameras/phones, which are harder to disguise) while being unable to as easily wear a mask in public to preserve some semblance of anonymity. Anti-mask laws exist for a variety of reasons, some of which I am fine with (e.g near banks) and some of which I am not (e.g abuse to shut down things like the Occupy movement). I would like to see a similar treatment of devices like this (spectacles, google glass, or whatever other product people work on in this space).
They should be treated on par with hidden cameras and the like. Until legislation takes care of this, I am not happy with the situation.
Hidden cameras (not terribly well hidden cameras, but hidden nonetheless) are nothing new, the Snapchat innovation is to reverse the camouflage to create completely different usage patterns.
If the Snapchat specs become popular there will actually be a knockoff market for fakes that don't even have a camera, because imitating just the recording status lights will be enough to get the "say cheese" effect.
Yes they do, by far. The next biggest pure AR player (by mau) is arguably blippar with about 8M. Metaio had a larger install base across all products, but they are gone.
I guess if you count Google translate they would eclipse test in their but I don't know how many people are using word view translate implementation.
I don't consider Pokemon go a pure AR play and even then their at numbers are hard to come by as a significant population used it without AR
On top of that, I've been consistently impressed with their technological prowess, even if the AR component seems somewhat inconsequential to me right now.
You better believe Snapchat is gunning for that top spot in social - that's what the IPO is about. If they're at or surpassed Facebook's level by 2020, I seriously would not be surprised.
For better or worse Facebook is a piece of social infrastructure and utility. Everyone has Facebook. All the groups I know of are organized through Facebook. All of the events. And so on.
...and figures out how to draw consistent revenue from that. Snapchat is making $365m this year in revenue, projecting $1b next year, and has a newly launched ads API.
Like what, the glasses or the apps? Would be interested to learn what they've done so well with on the software side.
I attribute their success to product design and knowing their market, but hadn't really thought of it as technical acumen.
Also, you probably know better than me, but to me it looks like the beauty filters are the ones that have really stuck for Snapchat. If I'm right and their users only really care about filters that make them look better, does that affect your outlook at all regarding their users showing an interest in AR?
I disagree with your second assumption, though I can see where it comes from. It's not so much the specific implementation, beauty or whimsy, but rather that people will take the action of modifying their real time view consistently.
I already know a lot of younger folks that are pumped about the Snapchat glasses...
(I'm not saying you're wrong... I just wouldn't make such steadfast predictions about the future either. But then again, I don't understand SnapChat and am not their target audience.)
You need to be right about half of successes, which is much harder for a raging pessimist like OP.
If your friends aren't using them and you're the only one with a pair you'd be less inclined to wear them. Everyone thought Google Glass was going to be the future but those glasses made you look like a total douche. Hopefully the Spectacles wont be branded as such.
Glass definitely failed in the marketing, branding, and roll-out departments (among others) -- but they're no more or less doofy (to me) than many other perfectly-accepted fashions: baggy pants, beats headphones, crocs, etc.
That is a fairly small focus group.
If the glasses are promoted as something you only wear when you want to record video and that you otherwise put away it might take off.
Nobody minds when you pull out a cell phone and record video because it's obvious you're filming. I think it was the omnipresent threat of being secretly recorded that made Glass creepy.
If Snapchat sets up the glasses business as an additional revenue stream, it could well become a reasonable but limited success, if they set it up "strategically", maybe even selling at loss, I predict terrible failure.
I mean that's a bet with a payoff & loss.
I'm not really knowledgeable about the "wearable" market, but to me it doesn't seem as ubiquitous as the smart phone.
Again: it's twitter.
> In 2012, KakaoTalk's $42 million revenue is broken down to 67.5% ($31.1M) gaming, 26.2% ($12.1M) advertising, and 6.3% ($2.8M) emoticon sales. [1]
[1] https://en.wikipedia.org/wiki/KakaoTalk#Company_Business_Mod...
What's your best guess of how many pair will sell through to actual customers?
I wish that there were more open data laws. A lot of startups would benefit from having the data volumes that more massive companies have.
With 1M users of spectacles (.6% of their current MAU), that's potentially 90BN images per month and over a trillion per year. In the same dataset. Machine vision wet dream.
[1] http://www.businessinsider.com/how-many-snaps-snapchat-users...
I think that they should be marketed as "cool glasses (that also record video)" as opposed to "video recording glasses". "Video recording glasses" are a gimmick, "cool glasses (that also record video)" could be timeless.
I think that people will be more likely to wear the spectacles for this reason--they can actually pass for a pair of somewhat ostentatious sunglasses to an unknowing observer because of their near-symmetry, vs. Google glass, the mere shape of which screamed "BORG!"
The merger of fashion and technology is possible, considering the existing fanboyism of some products and design of smart watches.
I'm surprised their hasn't been nearly the same adverse reaction to spectacles as there was to glass. Maybe we haven't seen it yet as they haven't been released, but people hated the potential of Google Glass sharing pictures and videos of people without them knowing. Maybe we've changed as a culture enough in these few years.
A potential weakness of Spectacles as a product is that it augments only non-selfie, "extraverted" photography. So it doesn't engage the selfie obsessed side of the userbase as much as the phone-based AR filters do.
I haven't been a fan of Snapchat, but now I'm curious to see how users react to this product.
So the real question is more has Snapchat and its functionality built enough of a cachet to be valued as highly as something like a Ray Ban.
I do wonder about whether people will find the video-recording-and-sharing aspect creepy. It might help a bit that people don't associate Snapchat as "instantly on the web forever" compared to other services. We'll see.
1) They're losing a ton of money. They barely have any revenue, and have over 1,000 employees, many of which are high paid engineers. They also have large technical overhead costs. My guess is they want to sock away 3-4 years of cash since they don't want to go back to the market too often.
2) M&A. Perhaps they buy some technology companies. Or Twitter? Or who knows?
3) They may be cashing out certain earlier investors.
When companies IPO, they have to release a significant amount of equity no matter what.
At this second? Sure, but they're project for pretty explosive growth (~ $1 billion in 2017):
https://www.emarketer.com/Article/Snapchat-Ad-Revenues-Reach...
Though really my point was this: it isn't the case that you need to continually re-grab the same users, it is the case that there are continually new users to grab.
I don't think we are mercurial but that we have less experience and therefore are much more willing to try new things. Snapchat is way better as an outlet to post more regular things you are doing to your friends because it is ephemeral.
Why? Because we all look back and see all the stupid stuff we posted when we were younger. The only reason I haven't deleted my facebook to delete all of that old stuff is because Facebook's other offerings are pretty good. While I hardly know anyone that posts regularly to facebook anymore, almost everyone uses facebook messenger and groups to communicate in isolated groups.
Snapchat has been blowing up because it fills that niche of "I want to post more updates about my life without really having to worry about how those updates will be interpreted in the future".
Do you also not do those things over common communication channels outside of talking face to face?
I'm genuinely curious because I literally don't know anyone under 30 that has never done anything that they did not want recorded in history forever.
It's not that I have posted anything on facebook/instagram/snapchat... that is really that bad/embarrassing. If it were all posted on the front page of the NYT I would probably go through life just as normally (albeit, quite a bit embarrassed by it). I would just prefer to minimize that risk.
That's where snapchat fills the niche. It allows me to speak more freely with others with less fear that everything I say and do will be pulled up years later completely out of context.
Honestly, the China gamble Uber had earlier this year shows me that they're spreading themselves too thin.
However, an IPO is a special case, as for years now a company/its board will consider an IPO as a business strategy decision and not as fundraising per se. Big shift in the 1980s.
There are some legal/regulatory aspects to an IPO and "liquidity event" type reasons an IPO is treated differently too.
Basically, an IPO brings many pros and cons with it. A company may choose to IPO even when it doesn't need the cash or even want the cash. The money raised is just a byproduct of choosing this particular business strategy.
(An analogy in pre-IPO startups: A startup may take an investment from a famous or influential VC even though the startup doesn't need the money at that point. Rather they look at it as a business decision because the startup really wants some other benefits they can get from having this famous VC as an investor. e.g. mentorship, network connections or even just more legitimacy by association... Lots of VCs provide non-cash benefits but you have to take cash to get them.)
As for how did Snap Inc. get that $4B number. That's complicated and not even an official number. But a simple answer could be if a company's current private valuation is ~$40B and they want to IPO for strategic reasons but only sell off/dilute as little as possible while still looking respectable.
They won't IPO only 1% of the company, too little, 10% is a respectable minimum. 10% of $40B = $4B.
Total speculation and just an example. But hopefully you see you are right to ask questions when these companies IPO as it's full of smoke and mirrors with a different story behind the scenes.
Do you think they are sitting around looking for a 500m exit?