A Product Market Fit Show | Startup Podcast for Founders
00:10:36 · Pablo Srugo
The reality is that for the average college student, there just isn't enough here. It's this cool idea and people knew Evan, so they tried it out, but they've got BBM, they've got WhatsApp, they've got texting. They've got all these other ways to communicate with their friends and of course they've got Instagram and they've got Facebook, so they've got all these other social media apps. There's just no hair on fire reason to start using Snapchat, which is why Snapchat ended up taking off with an entirely different set of users. It wasn't 20 year olds. They were effectively too old. It was actually high school students and it's pretty insane the way that this works out. It turns out that Evan's mom tells her niece, so this is Evan's cousin who's a high school student, about the app, and her niece in Orange County starts using it with her friends during school. Evan didn't know any of this. Actually he's looking at his dashboards and at some point in September, October-ish of 2011 starts to see these spikes between 8 AM and 3 PM and this is his cousin, it turns out, with her friends using it in high school. Then the big question, the obvious question is why did it take off there? We've talked about another concept before, which is find the weak spot. When you're putting out something new into market, you've got to find the angle, the spot where competition is extremely weak. Talk about David and Goliath. You are very much David versus the Goliaths. At that point, the Goliaths are BBM, they're WhatsApp, they're Instagram, they're Facebook for sure. They're much bigger than Snapchat was. In the places where those apps are already used, already popular, it's really hard to penetrate. What's going on? What's going on is that when Evan's cousin is in school, first of all, phones are not allowed. Like I said before, only a third of teens had smartphones. Most people don't have smartphones and phones of course are not allowed in class. iPads, though, those were allowed but the iPads are provided by the school and popular apps like Facebook are blocked out. WhatsApp, to be clear, you need a phone number associated. That doesn't work either. They actually have no good means to communicate with each other and that is where Snapchat fills a clear void. That's how it comes in because the hardest thing is to get you to download something and to just start using it.
00:12:43 · Pablo Srugo
Once they get used to Snapchat, now we're in a totally different world because now what they start to realize is, wow, this app is so much better to communicate. These are people that have not been used to texting. They haven't been used to any other world because this world didn't exist yet. All of a sudden, they have this really rich communication platform through images plus text. Remember that was another feature they added in, which wasn't just the idea of disappearing pictures. It was a picture with some text that you could add. This is how these teens start talking to each other, and of course they take it outside of the class as well. There are a few other things that really matter too. Evan talks in the early days about how he has this thesis in Jeremy Liew. You'll hear about him talking about it later about how everything on Facebook, everything on Instagram is by default there forever. That doesn't really make sense. I mean most conversations are ephemeral. As soon as you have a conversation with someone in real life, it goes away. It's not recorded and it would be weird if it was recorded. He talks about that being an underlying reason why Snapchat took off. I think at the end of the day, if you think about a teen, they're not that forward looking. I think at the end of the day what Snapchat became is a really compelling way at first to talk during class, which is a thing that teens have been doing in classes forever. You write a little note on paper, you pass it on. That was never going to stop, and this was just a much better way of doing that. Of course, the fact that it disappeared also meant guess what? You can't get caught. The teacher can't actually grab the piece of paper and read in front of everybody by the time the teacher notices, the picture's gone. Now when these high school students go back home and they do have a phone they can use or an iPad, guess what? The parents also can't see what they're talking to their friends about. This is a no-brainer better way of communicating with your friends. Once you've gotten used to it and you've tried it out, there's just no reason to stop and there's no reason to go to anything else. There's all the reason to tell your friends about it. This is what starts to take it off.
00:14:44 · Pablo Srugo
It turns out that none of the marketing mechanics that Evan tried, including, like I said, the hand-to-hand combat of going to malls, but every single thing that he did didn't work. The only thing that worked was ultimately finding a weak spot, which he stumbled upon, but it doesn't really matter. That's what ended up happening and then word of mouth. Once that happened, things just took off. The numbers are staggering. In August, he has 127 users. By December of that year, he has 2000 users, January 20,000 users, and by April of 2012 he's up to 100,000 daily active users. This is the power of finding a market that is very underserved and having an experience that's natively viral, not in the way that Zoom or Hotmail is viral where you send it to somebody who doesn't have it and they're exposed to it. This is where the power of network effects really play out because of course once you're exposed to it, you're so likely to tell your best friends about it because you want them to have it so you can talk to them on iPads or iPhones or Android phones and in a way that nobody else can see the images, and then they tell their friends and then they tell their friends. This is what drove growth. The other thing that's important to remember is even texting back then, texting images was quite slow. It took a lot of time to upload and it was very expensive. It was another piece that also made Snapchat so compelling. Evan on the OMR podcast actually mentioned specifically how disappearing photos wasn't actually the reason why it took off.
00:16:07 · Evan Spiegel, Pablo Srugo
[00:16:07] S2: Is that people weren't really using it to send photos that disappeared; they didn't care that much about that part. What they were really focused on was talking with pictures because it became a much more expressive way to show your friends what you were doing or how you feel. Text messaging can be very boring. It's hard to understand sometimes but when you send a photo, you can show your emotion in a split second. I think people really enjoyed talking visually. We renamed the app Snapchat and that was in 2011, and I guess the rest is history. [00:16:35] S1: Clearly at this point Snapchat is starting to have some success. From talking to Jeremy, what the data showed was that it was all organic. It was really the right product at the right time and it went viral through word of mouth. Jeremy explains how you could clearly see that in the data.
00:16:51 · Jeremy Liew
[00:16:51] S0: There is a good amount of luck involved in social software. It's not just about the right product and the right features; it's about resonate with the right users at the right time to create a culture that wants to propagate itself. When that happens, when the lightning strikes, it really can propagate. That was one of the things that we saw is we looked at the growth over time and those are only a few months of data, but what you could see is that it was highly geographic. It was growing in LA. There was a little segment in Georgia that had just started to grow, but it was growing at the same rate. What that told you is that this was genuine word of mouth. People were telling people nearby who were then using it with each other. You continue to see that over time, not just in those first few months, but somehow it picked up a little following in Sweden and it started to grow in Scandinavia. It hadn't picked up in the UK yet. Eventually Saudi Arabia became a really big local growth opportunity. Because all this growth was happening through genuine word of mouth, these geographic hotspots were evidence that this is real, not manufactured virality, not invitation driven virality, virality driven by people like sharing it with the people that were right by them, right close by, going to school with them, their friends.
00:18:14 · Pablo Srugo
[00:18:14] S1: With all the success, I mean people send sending more and more images and Evan is not making any revenue, and so literally the server costs started to go up to a point where can't afford it. I mean, he put in $10,000 into this business, Bobby had put in a little bit of money and his dad was funding it as well, but his dad was like, "I'm not going to keep money into a business that earns no revenue so people can just send pictures to each other." Evan starts to think about fundraising. He talks to Sequoia, he goes after Chris Sacca, he meets many different VCs, all of them pass. Some of them won't even meet with him. As this is happening though, Barry Eggers, who is a partner at Lightspeed, sees his daughter using Snapchat and he tells Jeremy Liew about it and that's how Jeremy Liew and Lightspeed ended up getting involved. I asked Jeremy to share the entire story with us.