“Disturbing”, “Nightmare-inducing”, “Vulgar” – it’s kind of interesting how many parallels can be drawn between the Miley Cyrus’
epic marketing machine transition to adulthood and Snapchat’s ridiculous valuation.
The pop star’s critics complain that it sets a terrible example to kids and will surely create a generation of tongue-proffering, foam-finger-violating, wrecking-ball-riding, weed-smoking twerkaholics. Similarly, I’d argue that multibillion dollar valuations of revenue-less companies are creating a dangerous precedent for entrepreneurs the world over.
Hyperbole aside, it’s simply brainless to place such a valuation on any company based on potential revenue streams.
However, the issue I want to address is that a lot of fresh faced entrepreneurs out there will look at Snapchat and think that the way to creating a successful tech company is:
- Create something that gets millions of users.
- Profit/Sell for a few billion and retire at the tender age of 26.
The initial problem is that people fail to realise how much work it takes to get to the first step (or even to 100k users).
Building a product that’s purely designed to get signups will most likely lead to a generic product that won’t serve anyone especially well. You’d probably struggle to get 100 users with such an approach.
Secondly, a lot of the press around the Snapchat valuation focuses solely on the money. That’s not a huge criticism seeing as it was based around a purchase offer from Zuck & Co. but it’s telling just how little was mentioned about the product (exploding pictures/videos) and possible revenue streams.
For those who say Snapchat can make money whenever they want by turning on advertising, let me make this clear:
If your monetisation strategy is the biggest reason your users turn away from the product then it is not a viable one.
The sad part is that “one year old company valued at X billion dollars” always makes for a better headline than “Company experiences steady and sustainable growth for third year running”. However, from an educational perspective the latter would most likely make for a better article. Unfortunately, the media is generally more concerned with headlines than delivering quality content.
So what can you and I do about? Firstly, take the likes of Snapchat, Facebook and Google out of the conversation. They’re very much exceptions to the rule and to try to emulate them is a fool’s errand.
Secondly, let’s promote the following three step-process:
- Identify and validate an idea.
- Build a quick & simple version.
- Charge for it from day one.
That right there, friends, is an actionable list and one that’s actually pretty to execute for most tech products. You can even practice it on your iPhone.
Leave the Snapchats to ponzi-scheme-peddling VCs; let’s create real businesses.