Start ups: The Story of Snapchat and their success stories

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Snapchat Inc. first grabbed global headlines in 2013, when the young startup rebuffedan acquisition offer from Facebook Inc. worth more than $3 billion. To most observers,the move appeared foolish and greedy. Snapchat had zero revenue, no businessmodel and was led by Evan Spiegel, then a 23-year-old college dropout with no prior


experience running a company. But what attracted Facebook soon became apparent

to many others: Snapchat was rapidly accumulating users, mostly teenagers, and

getting them to spend long periods of time in the app every day. Its core feature,

developed by Mr. Spiegel and his two co-founders as classmates at Stanford

University, is the ability to share a photo with one or more friends under the condition

they can only view it for a short period of time before it disappears forever.

With more than 100 million users sending over 400 million snaps a day, the company

has expanded into new areas, including peer-to-peer payment service Snapcash and a

media newsstand called Discover. Investors eager to get a piece of the popular mobile

app have piled in cash at fast-rising valuations, from $1.5 billion in November 2013 to

more than $10 billion less than a year later. But important tests remain for Mr.

Spiegel, who must now try to generate revenue without falling out of favor with his

legion of loyal users. The company tiptoed into advertising last year as Mr. Spiegel

vowed not to be “creepy,” or target individual users with ads, a lucrative practice now

common among all major Internet companies. The CEO, who rarely makes public

appearances and asks partners to sign lengthy nondisclosure agreements, nonetheless

brought unwanted attention on himself when a batch of leaked emails from his college

frat party days contained offensive remarks he made about women. A management

bench that includes former Facebook executive Emily White and former Credit Suisse

banker Imran Khan will help try to help the young company live up to its soaring

ambition and turn its free service into a moneymaking business.

Key Growth Takeaways

While the world is still debating whether or not privacy is the biggest right – Snapchat

stepped ahead of the debate to launch its algorithm of self destructive images and

gave users the freedom to be fun, to be themselves and share it with their “inner

circles” without wondering what the consequences would be, if the photographs made

their way to Facebook or the web. Snapchat is liberating in its basic essence and here

are three other features that rule:


  1. The app is not limited to smartphones.
  2. Doesn't need a data plan – if you can find a wi-fi hotspot, you're good to go.
  3. The photo and writing app lets you be creative and self-destructive images give

you the freedom to share it with a closed group.

A New York Times story spoke of how the co-founders shared an iPhone version of the

app with 20 of their friends in September 2011. A few weeks in, they saw multiple new

users join and noticed unusual spike in activity, particularly from 8am to 3pm. The

activity was courtesy several high school goers of an Orange County high school, who

heard about the app from Speigel's cousin studying in the same school. Soon the app

spread to other schools in Southern California. Educational centers and skill building

institutions like SQL training centers became the hotspots where teens and young

adults shared the app with one another and Speigel's app went to have 30,000 users

from only 3,000 a month earlier!

If Snapchat's growth could be attributed to a single reason, it would be its popularity

amongst the teenaged millennials. The truth is teens and the younger millennials are

in fact the primary trend setters. Other demographic groups adopt the trends set by

teens and young adults. Snapchat revamped itself for tweens (8 to 12 years), the teens

and college-going, young adults. Implications? Teens with no personal smartphones or

data plans could use the app on the family's iPad or computer and all that – without

wreaking havoc on the family's data plan. And that is why Snapchat won the patronage

of the youth.

Reduced friction. Photo-sharing is one of the most frequent daily behaviors of

smartphone users. By making photos private and disappearing Snapchat reduced the

friction or hesitation to share since: a) you're more likely to share a goofy photo and

send more per day if it's not on FB and b) you're more likely to send something a little

edgy (whatever that means to you) if it's going to disappear. In addition the UI is one

screen which makes it extremely easy and fast to send a photo or video in the


The viral effect. The most viral products are those that have increasing value as more

friends use them. Typical examples include Whatsapp, Facebook, Instagram or even

LinkedIn. But even more extreme as pure viral products are communication tools such

as a phone, text message or email, which effectively have zero value without at least 1

other person using them. Products such as these face a huge challenge of making

something addictive enough that it will be used at high frequency between friends but

if they're able to achieve this they can generate almost indefensible network effects.

Here’s one of the secret sauces to Snapchat’s viral growth: its group messaging

functionality. When a user sends a snap to multiple friends, the recipients receive a

snap indistinguishable from an individualized message. In effect, mass snaps feel

personalized. This is the holy grail of messaging platforms: evoking strong emotion

with minimal friction. Consider this emotion/friction matrix:

The virality of a messaging platform equals its emotion-friction ratio, and the Snapchat

paradigm maximizes this virality coefficient. A Snapchat of a funny face will evoke a

visceral reaction in the recipient before they have time to consider the meaning

behind the message. Conversely, when someone receives an MMS, the first thing they

see is the recipient list. Users immediately dissect mass text messages before

experiencing them. To solve this problem, Snapchat is intentionally ambiguous. Since

the meaning behind a snap is opaque, Snapchat alleviates senders’ social inhibitions.

This is revolutionary: by altering the social dynamics of digital messaging, Snapchat

created an atmosphere in which people share more openly. Have you ever felt

self-conscious about your “texting ratio” after you send three or four texts without a

response? Snapchat has no messaging history; it relieves insecurities about message

imbalances. Problem solved. Have you ever sent someone a joke via text then feel

insecure after not receiving an immediate response? You read and re-read your

message, thinking “How did (s)he interpret my text? Was my joke funny?” In Snapchat,

you can’t read your sent messages, so there’s no past correspondence to dwell upon.

Problem solved. Snapchat improves the messaging experience because it minimizes

the inhibitions of texting.” This idea of full attention plus intimacy is another big

appeal. If you didn’t “get” Snapchat before, hopefully this helps you understand the