Evan Spiegel Reveals His Business Plan For Snapchat, And It's Spam
There is an adtech industry term-of-art for untargeted advertising: Spam.
Snapchat's revenue model is now spam, apparently.
It is not often a tech startup founder admits that in plain English.
Untargeted advertising is the least effective, least valuable type of advertising there is. It's the advertising people complain about because it's irrelevant to them.
There is one qualification: Users will be able to choose whether to see ads or not, so there is at least one level of targeting - whether you want spam.
The strangest part of the statement is that there is no need for Snapchat to begin spamming its users. As we've noted before, Snapchat could serve targeted ads if it wanted to. By tying in with social media login data, advertisers could target people on Snapchat who have told Facebook or Twitter that they are fans of Arsenal living in France, for instance.
But Spiegel's statement does highlight the biggest hole in Snapchat: Its revenue model. Snapchat at some point will need to start showing it can generate serious revenue, in order to justify its $10 billion valuation. (Yahoo is one of its investors, and CEO Marissa Mayer is under pressure there to deliver a boost to her own revenues. She previously acquired Tumblr for more than $1 billion, and revenues from that company have been conspicuous by their absence. It would be unfortunate if this became a pattern.)
Snapchat surely can deliver revenue if it lets advertisers target users properly. But the reason Snapchat will need some extra targeting mechanism is because of the fundamental basis of Snapchat the app: It deletes your content, your data, as soon as it's created.
Most startups, particularly those hoping to generate ad revenue, hoard data like gold. Data can literally be turned into gold (or at least cash), after all. Good data - highly sortable, granular, and with the proper level of anonymity and user privacy features hashed into it - is the most valuable thing any ad business can create.
Snapchat has almost no data on its users, especially in comparison to Facebook or Twitter which both have a lot. Snapchat literally deletes the most valuable thing it creates as soon as they're received. You could, for instance, let advertisers target users based on keywords in their messages - but that would require Snapchat to not delete the messages (or the data). That would undermine the central utility of the app, which is that if you send an inadvisable message you have some assurance that it will disappear pretty quick.
Presumably, Spiegel has a long term plan that is more sophisticated than spam. Spam might seem like a good place to start - you can, after all, get a baseline ROI from spam to see how much more effective targeted ads are than spam.
But it risks a backlash from users, who hate spam. Presumably, that's why Snapchat's 100 million users will be given a choice to not see the ads. It's a weird place to start. But it's refreshing to see a CEO say it out loud.