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The price of shares in SNAP have dropped substantially since their IPO. Anaylsts are concerned at the companies ability to generate money off the back of the excitement their products generate.

I think there is a long term bullish case for Snap. It is their ability to extract data from the real-world engagements of users that sets them apart from other social networks.

If they grasp the always-on nature of the Internet of Things and retain their stickyness, then they are powerful enough to redefine memory and invert successful ad models online.

Snap is a camera company

I think the optimists case starts with the first page of the

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Snap is a camera company.

This was the counter intuitive claim that sent a lot of technology writers potty at Silicon Valley’s self indulgence.

There was widespread scepticism of Snap’s strategy in calling itself a camera (interpreted as hardware) company when its product was, clearly, all the millenials addicted to its platform.

From widely respected stock market observers at The Motley Fool there is this neat summary:

Ultimately, Snap’s hardware strategy and identity change are misguided. It’s true that the $130 Spectacles have generated quite a bit of buzz and hype around the company, and the reviews are generally quite positive, but there are countless hardware products that can boast the same but then subsequently failed to be commercial successes in the long-term or justify lofty valuations of their companies. Focusing on hardware threatens to distract from the very serious and very immediate need to grow ad revenue faster than cloud infrastructure costs, which is what prospective investors should really be worried about right about now.

The camera could of course refer to Spectacles and there is a strong chance that it does in the S-1. My feeling is that the bull case rests on Snap sticking to the idea of being a camera company and updating what that means in the 21st century.

Spectacles Prove the Concept and the Concept isn’t Glasses

Spectacles are groundbreaking to me for one dramatic reason. They are connected, they are ‘smart’ and they are a defining moment in products that bridge the digital and physical worlds.

This is going to matter to advertisers. It is a sea-change in how they are able to segment, message and reach potential audiences.

The Facebook and Google model, at a philosophical level, rely on induction from enormous users bases to create effective advertising models. They have access to partial information and primarily exist in their digital dimension. Induction here is a metaphor for the process of getting an ad to a person. It requires theory, testing and confirmation before becoming repeatable. It has to move from a particular to a general to be successful. That is prone to error.

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Snap can work deductively. Their products place them on the shoulder of their users. Overtly at first through Spectacles, Snap is welcome to accompany a user on their day. It can record and build a profile of people, preferences, places and any other vital data from just being on. Ads don’t need to go through testing for delivery, nor do we have to use a regression program to generalise conclusions about who is viewing an ad.

The categories are known and close to rock-solid. It is the most efficient vector for identifying and delivering ads possible – in theory.

If I have pictures of dinner at Chapter One on my facebook feed, facebook deduces I am a fan of fine dining. It needs to test that assumption and fine tune it – it may not be true and is therefore sunk cost. This can be done efficiently at scale but is categorically different from Snap.

Snap can know directly with a clever application of A.I. interrogation to my images, whether I like fine dining or merely want people to think I do. Or perhaps I aspire to but cannot afford it. This is deductive since the data yielded by surveillance and the target – me –  are inseperable.

Snap’s vision as a camera company is not Kodak. It is not going to provide us with endless wedding photos. Spectacles are not the revenue stream. They prove the concept and will bcome infinitely dispersed among Snap users in multiple forms. Products like Spectacles are vital for Snap to entrench its presence in users daily lives. For Snap to become their digital chaperone.

Snap’s vision is to be our memory

I have written on this previously:

Compiling images together into a kind of virtual flip-book supplants memory and cements the place of nostalgia in our culture and shapes the kind of products that are going to be successful.

It is the feeling that you are not really paying attention to the thing-in-itself but the thing-mediated-by-screen.

You have felt that. At a concert recently perhaps, or a party or when you should be awestruck by the Geysir and instead stand around with your phone hoisted in front of you.

The demolition of duration is an essential part of the business model, especially as A.I. becomes a solution in search of more and more problems.

Of course the incumbents try to move outside of their digital dimension. Google Glass, Google Home and Facebook’s phone represent products that might bridge the gap between the digital and the real. They are products that will funnel data which is inseperable from us toward the online databases – that makes the online identity better and yields more effective advertising.

Snap isn’t GoPro

What makes SNAP different from GoPro or FLIP? It is the relationship of connected, permanent access to your memory that it is forging with its customers. The products are always on and are able to:

  1. create and endless series of time-slices that can be crunched by A.I. and recast as memory later
  2. facilitate the playfulness that is a defining feature of the human mind. Word-play and image-play are as old as words and paintings.

The first point needs time since Snap has to reformulate an understanding of memory and build a reliance of customers upon it as an interpreter of memory.

The second is what keeps us addicted as human playfulness is evolutionary, it keeps us alive and so promotes biological rewards to keep us coming back.

What is the product?

If I can illustrate with a store I saw earlier this week.  Offline cookies miss the point – they are powerful but they are still inference based. Snap’s positioning turns it into the holder of deducted data from our real world.

It leaves some options for product and revenue;

Hyper-effective advertising: If you cannot build effective campaigns from their model you are probably in the wrong industry. It should be possible given the qualitative difference in data quality. TV was one-to-all general ads. Facebook and Google appear as one-to-one but after a process of iteration and deduction. Snap is inverting that to give you all you need to know to pitch directly and hit first time.

Advertising is narcissistic and the more you know your target the better. Their network gives you deductive possibilities but you have to test those. Snap has the network but it has the direct access to the users’ day (not just what they post). That granularity is the power of the social network leveraged by the Internet of Things.

Information: Nielsen revolutionised TV advertising by inventing a box that tracked accurately what people watched. That information made them very rich and was the key that unlocked TV advertising for decades to follow. It drove up the value of advertising everywhere by quantifying the phenomenon of private TV viewing. The reciprocal nature of the market meant Nielsen became indispensible.

Snap can potentially be both the Nielson box and the medium. They have the data on your daily life at and away from the screen. With clever background technology they can know with certainty, not probability.

The bullish case involves them seeing that market and creating it.  I think Snap know this intuitively (again from their S-1)

In the way that the flashing cursor became the starting point for most products on desktop computers, we believe that the camera screen will be the starting point for most products on smartphones. This is because images created by smartphone cameras contain more context and richer information than other forms of input like text entered on a keyboard

The 21st century camera company isn’t Kodak. Om alluded to this in his New Yorker piece. They have the cash to create exactly what a 21st century camera company looks like. I think it revolves around reframing memory.

It is also possible they are just clever lads in hoodies and going to turn into Twitter.

This is significant philosophical and ethical change to undertake. I will write further on those aspects in the next few weeks.

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