Prediction: Snapchat Will Be Acquired In 2014

I predict that Snapchat will be acquired in 2014. Why? It’s simple…it’s really, really hard to build a breakout consumer mobile product, yes. But, what’s even harder is to turn that attention into a business. Now, countless people (including yours truly) have mused about how Snapchat could make money (I believe they could), and even more people believe they can’t because of the nature of the network and potential ad unit.

Let’s look at the hurdles needed to be cleared to become one of the best, independent apps in the world. First, one has to develop for iOS and Android. That’s hard! Then, those people have to build something that is actually used by people at least a few times a week, and not just for a month. That’s not easy. Then, it needs to grow on some type of network effect — every product is searching for a network effect, and there aren’t many out there. Then, once the app gets into that stratosphere, it needs to make a decision — partner with a company that can either help with distribution further and/or help with monetization. When faced with this choice, as we all know, Instagram sought to partner by being acquired by Facebook.

Less than two years from the Instagram, Snapchat is likely facing a similar decision. What’s different this time, however, is the PR antics around Snapchat, the leaks about acquisition offers and prices. And, I think the price can be justified, actually, despite all the noise. If everyone at Snapchat except the few devops people went to a remote island for a month, the service would still grow — the product has reached an orbit with its own speed and gravity.

That said, however…every potential ad unit test the company attempts from hereon out will be scrutinized and people will wonder if the product can grow into its implied valuation. The moment the narrative goes from measuring the number of photos shared per day to the number of ad dollars raked in per day, it changes the stakes for the company, employees, and investors, and with two big suitors with deep pockets who compete against each other circling around Venice Beach, the time may be right to max out the value and cash in. Facebook views Snapchat as a threat, and rightfully so…for Google, acquiring this is a rounding error, and lets the service continue while poking its rival.

I predict this will happen in 2014. I don’t have any inside information, just relying on my gut instincts. There’s a very good chance I’m wrong and this post will look foolish. I like Snapchat and have written about it quite a bit because I find the product and storyline fascinating. But, in today’s world of apps, while distribution is the most elusive nectar every mobile startup is in search for, those that do breakout will show that it’s building a world-class, breakout product that matters the most — and that turning the attention into revenue is, most often, best left to the big boys and big girls on the block — the two big companies who will know how to (in)directly turn mobile attention into monetary value.

Haystack is written by Semil Shah, and is published under a Creative Commons BY-NC-SA license. Copyright © 2018 Semil Shah.

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