SnapChat CEO Says Facebook Inc (FB) Will Be As Irrelevant As Yahoo! Inc


evan spiegal

Facebook Inc (NASDAQ:FB) has been predicted to go the same way as, former Internet leader, Yahoo! Inc. (NASDAQ:YHOO) by Snapchat CEO, Evan Spiegel. Yahoo, which had a market cap of $128 billion during the dot-com boom, witnessed its market cap shrinking below $10 billion mark after the bubble burst.

In the case of Facebook, fears of its mobile reach were also dispelled by solid revenue from the segment. It resulted in the shares surging. However, Snapchat CEO believes that it did not come from sustainable brand advertising.

Can the company address the issue that Even Spiegel raised? While the points raised by the Snapchat CEO may be valid, Facebook would be expected to clear the doubts not only by its performance but also by providing data on sustainability.

Reasons For His Opinion

Snapchat CEO said that the companies buying ads from Yahoo were not from traditional brand advertisers and were dot-coms themselves. He said that undue payments were made to become official partners of Yahoo in different sectors, be it travel or greeting cards or pet stores.

Spiegel pointed out that the money spent towards ads were not from the revenues the companies generated but from venture capitalists, which made their investments. Therefore, when funding from venture capitalists dried and bubble burst, Yahoo struggled to find revenue thus dragging down the market cap.

Snapchat CEO finds the same situation for Facebook too as the company’s ad revenues were over relying on traffic and users of start-ups backed up venture capitalists. The difference was that Facebook was buying app install ads whereas links were bought on the homepage of Yahoo.

Venture Capital Funding

According to Spiegel, when the Federal Reserve stops printing money, venture capital funding would also dry for the startups. It would lead Facebook to fall violently all of a sudden, according to the rival SnapChat CEO.

On the question of continued performance despite fall in the user engagement apart from other factors such as retraction of brand advertising, he said that it was mainly because of mobile advertising performance, particularly app install advertisements. Snapchat CEO believes that it only showed that sustainable brand advertising is yet to move on to Facebook mobile platform. The recent growth in mobile ad revenue was due to venture capital funded technology companies.

Viraj Shah

Viraj Shah has completed M.Com (Finance) and is currently pursuing his CFP. He tracks US markets along with other global markets like India very closely. He is very passionate about stocks, real estate, and technology. He also believes that money can always be made in the market.

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