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TheStreet Open House

Facebook Journey Is A History Lesson For SnapChat

Stocks in this article: FBTWTRZNGA

Of course, Snapchat hasn't built up the number of users that Facebook Inc (FB) and Twitter can boast, but it has achieved a dedicated following in a very short period of time. The site takes one of the most popular aspects of Facebook, sharing photos, and then ensures that this remains private between oneself and only the approved few that you wish to see them. This is a nifty idea that has particularly found favor with women, with the company recently confirming that 70% of the Snapchat user base is believed to be female.

SnapChat Facebook’s worst rival?

As aforementioned in this article, it was highly likely that the big guns in the social media sphere would keep abreast with developments related to Snapchat, but this was confirmed beyond all doubt when Facebook Inc (FB) decided that this was one rival it wished to eliminate from the marketplace. Thus, Evan Spiegel, Snapchat’s 23-year-old co-founder and chief executive, was presented with an offer than many of us wouldn't mind receiving; a $3 billion buyout offer from Facebook.

In the manner of the most idealistic and ambitious young entrepreneur, Spiegel rejected this offer, obviously considering that the market value of the company was potentially many times that, or at the very least considerably more than that which had been offered. This is a pretty confident act considering they haven't seemingly generated any revenue yet.

This has been a massive problem for all companies in this high-profile sector. Rarely have there been a collection of companies which are such obvious household names, which attract ten-digit valuations, which attract millions, and indeed billions, of users, yet don't make any profit.

Twitter focused on attention rather than money

Twitter Inc (TWTR) is talked about every day in the media, it attracts an incredible amount of attention, every television and radio program constantly references tweeting and asks for their listeners and / or viewers to contact them via Twitter, and anybody who is anybody in the world of sports, showbiz and music is on there. But they don't make any money, and seemingly have no clear strategy to do so.

Facebook Inc (FB) has had similar difficulties, although after a serious plummet in the social media site's value after its initial stock market flotation, its share price has recovered somewhat. But converting users into sales has been an issue that neither Facebook or Twitter Inc (TWTR) has actually managed to achieve, in fact there is little evidence that either site has definitively decided what it is, or should be, selling.

Snapchat may have garnered a lot of attention in a short period of time, and may also have achieved technical accomplishments which are genuinely impressive and popular. But it's debatable whether its selling points are actually useful to advertisers, who would prefer to have a slower-moving platform in which users can be definitively profiled. The jury is still very much out on whether Snapchat has been overvalued and how it intends to develop revenue streams in the future.

-By ValueWalk Staff

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