The fast rise of some newer messaging platforms underscores the shift. Four-year-old, cross-platform messaging startup WhatsApp now has more than 200 million active users and processes more than 20 million messages a day, says its CEO, Jan Koum. It’s also currently the most popular paid app, according to the analytics company App Annie.
Snapchat, the 2-year-old startup that allows users to send quickly disappearing photos and videos, is the 10th-most popular free app for the iPhone right now, according to App Annie. That puts the company – which facilitates 60 million “snaps” each day – one rung above Google Maps.
The question is whether such new apps are real businesses, or if they’re just as evanescent as the technology solutions they provide.
Venture capitalists who follow messaging apps argue that a very real evolution is afoot, and that there’s money to be made off startups that foster communication in ways that more closely mirror real-life exchanges.
Last fall, for example, First Round Capital, an early investor in the social network Path, participated in the seed-round financing of San Francisco-based MessageMe. Among other things, MessageMe’s platform allows users to receive text messages without sharing their mobile number (think customer relations and dating scenarios) and to stop conversations if necessary. It also allows users to search for pictures and videos on the Web and doodle on them before sending them off. The idea is to make the exchanges more colorful, more controllable, and ultimately, more intimate than standard text messages.
Says Kent Goldman, a partner at First Round, “Wouldn’t it make sense that as we start communicating more and more [using our devices] that we’d want them to act the way we act naturally with one with another?”
Josh Elman, a principal at Greylock Partners, has also taken note of changing user behavior, saying that seemingly “everyone between the ages of 14 and 20 who maybe didn’t have a smartphone does for the first time, and they’re communicating in very different ways than previous, older smartphone users have.”
While Elman believes that Facebook and Instagram “aren’t going away,” he observes that there’s “something about status updates and photos [on Facebook] that feels very much like you have to paint the very best picture of yourself. Instagram is the same; it’s not necessarily about what’s going on, but whether you can present a moment perfectly, with just the right filter and everyone looking their best. Kids worry: ‘Will my friends not like me or give me enough likes if this doesn’t come out right?’ So you’re going from these platforms that are public to more semiprivate and much more personal platforms that are enabling a different scale and where going back and forth feels more natural.”
But how many platforms? And how big is the market? No one seems to know. When I ask Bill Gurley of Benchmark Capital — which led SnapChat’s $13.5 million Series A round in February – if the firm is following new messaging technologies that give users more control, he says in an email that Benchmark “didn’t choose to invest in this as a ‘category’ but rather got very excited about the specific company and team that is Snapchat.”
Still, Gurley adds that Benchmark’s “own due diligence convinced us that the permanence of creation social media is concerning to certain users that are opting into Snapchat.” Meanwhile, Goldman says he “absolutely” sees an “opportunity in making people feel more comfortable about expressing themselves in a natural way.” And Elman calls it a trend he’s been “tracking closely.” (Elman invested in MessageMe through the Greylock Discovery Fund, which allows partners to make investments as small as $50,000 in startups that interest them.)
As for whether all these messaging apps — including Kik; Path, which offers private messaging; and Viber — can make actual money, Elman scoffs at the widely held assumption that they can’t. “Every time, when it comes to the consumer Internet, people are quick to say, ‘There’s no business here.’ But they completely miss the fact that these are new, important behaviors and that as consumers shift the way they communicate or interact, there will be plenty of ways to invite monetization, especially for those companies that get to a large enough scale.”
WhatsApp already charges 99 cents per download, and it envisions much more revenue down the road. As Koum told an audience at an AllThingsD conference last month, “We’re looking forward to a world with billions of phones. And once that happens it’s going to be extremely easy to monetize.”
Snapchat also appears to be entering money-making mode. At least, on Tuesday night, Taco Bell tweeted to its roughly 450,000 followers that it’s now on Snapchat, adding “Add us. We’re sending all of our friends a secret announcement tomorrow! #Shhh.” (The company later told the site Valleywag that its “secret announcement” was a 10-second video advertisement for one of its taco products.)
Will it be enough? By the time the answer is clear, it’s usually too late, suggests Venky Ganesan, a managing director at Menlo Ventures who also sees potential in technologies that address what he calls humans’ “primal need” to share information in natural and more private ways. Likening Snapchat to Instagram, Ganesan recalls that “big companies saw Instagram as a feature, and not a terribly innovative one. Meanwhile, the company was able to build a very loyal community around its product. i think the same thing is happening here.”
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