Friendster, Snapchat: Introductions All Around

snapchatThere is an apocryphal story about The Beatles that speaks to the growing spike in investment in social media startups. The tale uses the hindsight of history to scold the poor shmuck who passed on signing the Beatles to Decca Records in the early 60s.

To use a bad pun, that tale has had a very long tail. In the years that followed record labels became less discriminate about putting their money behind a fledgling bands. Today that same type of thinking seems to be the default approach for tech investors.

It’s the ‘Who Knows?’ question.

And when you think about it, who really does know what the next big thing in the fast evolving social media landscape will be? Apart from few clairvoyants, very few. And so the dollars continue to flow.

Was Facebook being wise or foolhardy the other week, when they put $3B in front of Snapchat owners? And were the Snapchat kids wise or bluffing when they turned them down flat?

The real issue of the Snapchat /Facebook contretemps is about The Big Gamble. Will Snapchat become as ubiquitous as Instagram (currently they have a solid lock on the teen demo) or an also-ran like MySpace?

Haunting investors are the ghosts of the late 90s – huge investments in domains like that left the markets skittish on webups for at least a decade.

What makes Snapchat such a prize is their current sizzle, having turned down other offers including a prior Facebook cheque for $1B. But that cheeky narrative is also part of the problem. About four months ago, they raised $60M in cash, which upped their valuation to something around the $800 million mark. There is a lot of buzz about Snapchat. And a lot of people asking the ubiquitous question: Who knows?

This brinkmanship is a gamble that may pay off for Snapchat. But their appeal is subject to the fickleness of teens’ trend hopping. And that’s a tough bet to make.

Ten years ago, in the wake of Facebook’s early growth, Google offered $30M to a rival friend-based start-up. Friendster turned it down and now tops a dubious list: the Whatever-Happened-To Awards. Will Snapchat join that list? Time – and the evolving social media marketplace – will tell.


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