Well this estimate http://techcrunch.com/2013/11/19/how-many-users-does-snapcha... is that snapchat probably has at least 10M users. So let's say you wanted a 10% return on your $3B value, you would have to generate $30 in net income per user per year ($300M). If you charge a 'membership' fee of $3/month [1] that gives you $360M a year, leaving $60M/year (or $5M / month "burn" rate).

So would people pay that? I don't know. But it would be the sort of math you would go through evaluating that deal.

To evaluate the server deal you have to look at how many units you think you are going to ship, what your COGS are on them, and your gross margin. You can't really give someone 'free server' for a year because you have money sunk into building it and shipping it.

Further your revenue probably doesn't change if 100 people use a server or 1000 people do.

My point remains that it is not possible to compare 'goods' economy companies with 'info' economy companies.

[1] [Edit: added the RPM rates] Conversely, in advertising terms with 400M snaps per day you would need a RPM of $2.50 to generate $360M/year in revenues.

I highly doubt SnapChat's audience of majority less than 18-year-old population (with most in their early teens) are going to pay $30 a year for a way to send auto-deleting pictures to each other. Especially when there are numerous other free multimedia messaging apps. Getting even 1% of that audience to pay would be impressive.

An RPM of $2.50 is also equally unrealistic for an audience of the mostly non-credit-card holding teen demographic, even more so when they're looking at the autoexpiring content for mere seconds before moving onto reply. Not only that but I'd bet a lot of those snaps per day come from a small subset of the 10M users.

Less than 18 turns 30 in 10-15 years.

And chances of Snapchat existing in its current form in 10-15 years are microscopic.

> So would people pay that? I don't know.

I know. People would not pay that.

The same way you know IBM small server business would be worth more than an app?

Common sense no longer applies here.

No, I have no idea about the relative values of server businesses and apps. But I know that very few people will pay $3 a month for Snapchat.

So lets say you take it as a given that snapchat is mostly teens. They look at their snapchats, there is a way to know they have seen them. Lets say you are the GAP and you want to get the latest "look" out there, so you pay SnapChat $.05 every time Snapchat shows a Snap of someone in the "look". Snapchat has to show 50 "Gap" snaps in every 1,000 to make $2.50 per thousand. Typical user will see them on one in 20 'snaps', if the average really is 30 snaps looked at in a day, that is one per day.

I'm not saying you are wrong, what I'm saying is that I can imagine how they would make it profitable should they need to.

Sure, what you're describing is feasible. I was referring only to the idea of end users paying for the Snapchat service.

What I read out of your comment is that though comparing both kinds of companies is invalid, valuations on information economy companies is at present nonsensical at best.