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Comment by cylinder | Hacker News Reader

Imagine a beach. People come to the beach, play, build sand castles they later destroy. It's one beach on a long stretch of coastline. But this particular beach is incredibly popular, where lots of young people go to hang out with each other.

How much would you pay to own that beach? How would you justify that investment -- would you plan to charge an admission fee? Would you wrap the beach in ads and sponsors? Would you charge to build sandcastles? Would you sell concessions?

I think it's helpful to think of SnapChat and many other businesses with this metaphor.

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That's actually a really interesting analogy. I'm sure it's incomplete, but it instructs analysis.

Ownership of the beach is clearly valuable, even if it's unclear exactly how you will extract that value. And beach popularity can be subject to trends and other outside factors.

It's also easy to ruin a beach, and therefore its value by too aggressively trying to get the value out of it. For instance, I'd rather keep the beach free of ads and aggressive tourist sales people to make my money on hotels, condos, and restaurants near to the beach.

I'd say the biggest problem with the analogy is that only part of a beach's value is derived from the other beachgoers - there is some intrinsic value to the combination of sand, sun, and waves. For snapchat, if there are no other users, there is no value at all.

It's simple, you buy the beach next door, and wait for the popular beach to implement any of the above changes. Then you advertise as the beach without ads, the beach without admission fees, or the beach where you can build free sand castles. Then when the people come, you sell your newly successful beach, and run.

This metaphor is helpful in terms of thinking about how users interact with the service and how advertisers and vendors might try to get at these users.

The very large problem with this metaphor is that you are not taking into barriers to entry. Beaches are valuable in the real world because it's impossible to change the ocean and extremely costly to remove rocks, import sand, bring in wildlife, build access points and accommodations, etc. to suit the needs of the beachgoers.

The digital beach market has low barriers to entry. If Snapchat ruins its beach with advertisements, pollution, and annoying fruit vendors, then users can very easily and very quickly move to another beach of similar or higher quality that can be built in a matter of days.

Yeah, and then all of the sudden it starts raining and the kids flock to another beach with a newer DJ and fresh faces.

End game.

I believe FB Poke tried to make it rain but look how that turned out

To be fair though, snapchat isn't old enough to be "lame" while facebook is, and snapchat isn't doing anything to piss off users yet (which they will have to in order to monetize most likely).

We'll see if snapchat can hold the throne after serious monetization.

Great analogy. I mean, they charge something like 18$ for a beach chair on South Beach.. People still go and still pay.

I don't know, the article came across as missing the point in my opinion.

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