Snapchat Isn’t Selling Out

It’s buying in.

carrier Snapchat pigeons.
Snapchat is acting more like an old-school media company than a Silicon Valley startup.

Photo illustration by Juliana Jiménez. Images courtesy Snapchat and Thinkstock

On the surface, Facebook is about people and relationships. Peel back its skin, however, and you’ll find layer upon layer of data. Your news feed is the product of a stunningly complex ranking system that evaluates your friends’ posts on features like timeliness, relevance, and virality. Those same rankings determine which of your friends will see your own Facebook posts, and how far down they’ll have to scroll to find them. Your every move on Facebook—scroll, click, like, comment—is recorded, analyzed, and factored into the site’s inner workings.

In this way, the entire site is continually being optimized to maximize the amount of time its users spend there. You can try to game Facebook’s algorithms, but they’ll keep changing to thwart your efforts. In the long run, it’s the other way around: Facebook is gaming you.

Snapchat, in many ways, is an anti-Facebook. Its ephemeral messages, which disappear after a set number of seconds, promise a more spontaneous form of online interaction—one in which your every move isn’t being tracked and marked down on your permanent record. You don’t have to crack Snapchat’s code in order to get your message across to your friends. Just send it to them, and they’ll see it. (That is, provided you can crack its mystifying user interface.)

Snapchat has never made money on its private messaging features, and in a rare interview with Bloomberg Business on Tuesday, 24-year-old CEO Evan Spiegel ruled out selling ads within them. He considers Facebook-style targeted ads to be creepy: “It’s definitely weird when a vacuum follows you around the Internet.”

This might all sound very fresh and forward-looking—just what you’d expect from an app built by and for a generation of kids who came of age with their parents and bosses on Facebook. But the laws of Silicon Valley and capitalism dictate that a hot startup eventually find a way to convert its popularity into cold cash. And the downside to an app optimized for fun rather than clicks is that, well, fun doesn’t pay the bills.

So it is that Bloomberg Business finds Spiegel nervously riding a Segway around Snapchat’s Venice, California, headquarters, scheming ways to turn his creation into a multibillion-dollar corporation without the aid of sentient vacuum-cleaner ads. Asked why he so rarely gives interviews, the foul-mouthed former frat brother exclaims, “I’ve been working. This shit is hard!”

What’s interesting about the piece, aside from the unsurprising revelation that Spiegel comes across as a jerk even when he’s trying really hard not to, is the evident difficulty Snapchat faces in finding a fresh business model to justify its $15 billion valuation. Spiegel knows he doesn’t want to be the next Facebook. So instead he’s trying to be the next … Viacom?

That’s the comparison propounded by one prominent tech who told Bloomberg he sees Snapchat as an emerging force in mass media. It’s more apt than you might think.

It isn’t that Snapchat will grow as vast as Viacom, which operates some 170 television networks around the world—I doubt it will, although I’ve been wrong about it before. But Spiegel’s aversion to Facebook-style data-mining, click-counting, and algorithmic optimization has pushed him toward a business approach more closely resembling that of an old-school media company than a Silicon Valley social network.

Snapchat’s first big moneymaking push is Snapchat Discover, in which major media companies create videos and stories made for the smartphone and tailored to the app’s young users. Interspersed with those stories are high-budget video ads aimed at that same coveted millennial demographic. The 10-second spots don’t look like the ads you’d expect to see on Facebook or Google: They look like TV commercials.

To bring advertisers on board, Spiegel is embarking on a tour of the big ad agencies in London, Los Angeles, and New York, where he plans to make his pitch in person. That’s unusual for a tech CEO, Bloomberg notes: Many consider ad sales to be beneath their dignity—a job better suited to software programs. Spiegel’s solution for integrating music into the platform is also strikingly retrograde: Last year’s Sony Pictures email leaks showed that he had considered buying his own record label.

What the Internet has done to media over the past 10 years is to decouple the message from the messenger. You’ll now find New York Times stories jostling for position alongside BuzzFeed listicles and Daily Mail gossip items in your Facebook and Twitter feeds. And their relative positions are determined by Facebook’s data-driven news feed algorithms, rather than by editorial judgment. Snapchat Discover, in contrast, mimics the old-fashioned newsstand: First you pick your publication, and then you take whatever their editors have chosen for you that day.

The logic behind this approach? Good old-fashioned paternalism. Spiegel, we learn, “feels he has a responsibility to show Snapchat’s impressionable young audience things that are meaningful, not just popular.” Spiegel himself adds: “There’s a sort of weird obsession with the idea that data can solve anything. I really haven’t seen data deliver the results that I’ve seen a great editor deliver.” 

If you didn’t know in advance that Snapchat’s CEO was a 24-year-old “enfant terrible,” as the Bloomberg piece puts it, you might conclude from the article that he was a crotchety old media baron who didn’t understand the Internet.

It’s clear from Snapchat’s smashing success that the Internet was ready for an alternative to Facebook’s popularity-contest approach to online interaction. Whether the pendulum is as ripe for a reversal in online advertising, however, is less clear. Not for nothing are Facebook and Google growing at a breakneck clip while Viacom is laying people off.

Early reports had Snapchat advertisers paying exorbitant rates—on the order of $100 per 1,000 views, or twice as much as YouTube and Hulu charge—to reach Snapchat’s coveted millennial demographic. That rate is now down to a much more modest $20.

There are signs, however, that Snapchat is not quite as dismissive of “data-driven decision-making” as Spiegel would have us believe. A notable feature of Snapchat’s video ads is that they’re formatted to fill the screen when you’re holding your smartphone vertically. (Most online videos are designed to be viewed in landscape mode.) The reason: Snapchat says it has found that people are nine times more likely to watch the whole ad when they don’t have to turn their phone sideways.   

Vertical video ads may not be the revolutionary idea that changes Internet advertising forever. But they at least put Snapchat out in front of the mobile video trend that is sweeping the industry.

Besides, when pressed by Bloomberg as to how Snapchat will “change the world,” as Spiegel promised in a company memo just six months ago, the young CEO indicated that might not be on his immediate agenda after all. After launching into an anti-media tirade that he deemed “off the fucking record,” Spiegel told the magazine that it would be “ludicrous” to suggest a 24-year-old running a 4-year-old company could change an online culture that has rendered online privacy an oxymoron.

“We just don’t have the capability to solve that. I’m sorry,” he said. “We help people share pictures.”