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Facebook Journey Is A History Lesson For SnapChat

Stocks in this article: FB TWTR ZNGA

There is no market which is more fast moving, nor more ephemeral, than that of social media. Vulnerable to the vagaries of fashion and personal taste, the big players in this field are not known for their stability, but rather for their fortunes fluctuating rapidly, and experiencing considerable skepticism about their market value.

Thus, the original social network website - so notorious that they made a movie about it - Facebook Inc (FB), was considered grossly overvalued by many analysts when it first floated, and quickly tumbled in value. There were two fundamental problems which Facebook faced.

Facebook’s strategies for generating income

Firstly, it wasn't entirely clear how the site was going to generate income, except from advertising. Facebook Inc (FB) tried to attract people to the site with a variety of different approaches, most notably interactive games. But the biggest producer of Facebook games, Zynga Inc (ZNGA), has largely ditched Facebook games in favor of gambling applications it never hurts to rely on betting games that are statistically impossible to win at for any significant length of time, and there is no doubt that gaming is a phenomenally competitive arena.

Secondly, as quickly as Facebook Inc (FB) became the site that everyone had to be part of, so a pretender came along and rapidly became far more than a pretender. Twitter Inc (TWTR) caught on like wildfire, and while Facebook remains the definitive social media site in large parts of the world, most obviously the Middle East where Facebook is utterly dominant, Twitter attracted users in the West in particular with its simplicity and unpretentiousness. It was more fun than Facebook, and as this was the overwhelming reason that people signed up to social media sites, Twitter has attracted a vast number of users.

Facebook vs. Twitter users

While Facebook Inc (FB) still boasts over 1 billion users, far in excess of Twitter's roughly 250 million sign ups, the feeling persists that the latter retains its users for a much more sustained period, and that Tweeters are considerably more committed to the platform than Facebook users are to the world's biggest social media site.

But given the fashion element which is so critical to the success of social media sites, both Facebook Inc (FB) and Twitter Inc (TWTR) are already monitoring the progress of a new upstart very closely indeed.

Snapchat’s overview

Snapchat is an embryonic social media site which is perhaps not the most original idea in the world, but is building on the popularity of sites such as Instagram to gain a great deal of momentum and traction in the social media marketplace. Snapchat has a very simple premise; it enables users to take photographs, record videos and add text and drawings to them, and then distribute them among specified lists of recipients. Every item sent on Snapchat is referred to as a 'snap'; hence the name of the application.

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