Having a widely successful photo sharing platform is only the beginning. The next step, the hardest one, is monetizing it. Snapchat might be the first one on the path of a successful implementation, even if it is still far away.
We have already touch upon this subject before but Snapchat’s announcement that it is partnering with Square to offer money transfer within its app brings it back into the forefront of the news and a little dive deep can’t hurt.
Free is not enough
Photos on the internet want to be free. Whether it is to display personal moments (food, selfies, vacations, weddings or exciting week ends) or seeking social recognition via crafty images displaying an artistic talent, no one is really interested in paying to either publish or view those images. Flickr has made it quite clear and successor like Instagram, Facebook, G+, Pinterest, Snapchat, 500px, Whatsapp and others have just confirmed it. Billions of pictures uploaded and viewed daily, the vast majority for free.
However, building and maintaining a photo sharing platform, especially a multi- million user one, is expensive. While VC funding is useful, it is not a viable business model as it will run out eventually. So, what is a startup to do ?
Leaking at the seams
The options have been limited. Offer a paying “pro” version for the more addicted users ( Flickr’s model) or/and advertising. Instagram, Snapchat, Pinterest have opted for the latter. But they are terrified at the possible impact on users and are moving at snail pace. So much so that companies like Instagram are leaking income at the seams. Frustrated by not being able to convert massive engaged followers into buyers, brands have taken upon themselves to offer individual solutions . Other companies, like Curalate, Olapic or Chute exploit Instagram’s lack of initiative even further by reselling its content to brands, moving the buying option right into the brand’s site.
A shoppable Snapchat
Snapchat, obviously, got the message loud and clear. They will allow users to purchase directly from the images themselves. If you think for one moment that its recent deal with Square is solely for users to transfer money to each other, you have gotten it wrong. While there might be a small revenue stream involved, the whole purpose of this deal is to offer brands the ability to receive payment from users, in exchange for products. Create a shoppable Snapchat.
Not that Snapchat will leave the advertising space: There is too much revenue potential. But by allowing brands to use Snapchat as a one stop selling platform – just imagine a 10 second sale where if you don’t buy it its gone – they open the doors to massive revenue. Selling products directly from posts is something that took Twitter years to offer, while Facebook is still toying with it, and Pinterest or Instagram are still ignoring.
The hundred pound gorilla
One of the reasons for most photo sharing platform to ignore the hundred pound gorilla might be the market for online impulse buying is not that strong. As we have seen with companies like Stipple or Taggstar, there just doesn’t seem to have enough traction. However, none of these companies have functioned at scale remotely close to Pinterest or Instagram. Pinterest got some flack early on when it used affiliate programs to generate revenue but that was more for their lack of transparency than their method. However, they seemed traumatized, if not paralyzed, by that experience.
We can be sure that when Snapchat opens the gates of in-image purchasing within its app, not only the competition will be looking very closely at the results and if they are not too conservative, replicate the model very quickly. Otherwise they might experience a major shift in brand adoption that even a massive user base will not compensate for.
Photo by Jorge Quinteros
Author: Paul Melcher
Paul Melcher is the founder of Kaptur and Managing Director of Melcher System, a consultancy for visual technology firms. He is an entrepreneur, advisor, and consultant with a rich background in visual tech, content licensing, business strategy, and technology with more than 20 years experience in developing world-renowned photo-based companies with already two successful exits.