YOU’LL NEVER MAKE MIL­LIONS ON SNAPCHAT

Bloomberg Businessweek (Asia) - - FOCUS ON/BIG DATA - By Max Chafkin & Sarah Frier

On a Wed­nes­day in early Fe­bru­ary, Khaled Khaled, a 40-yearold record pro­ducer from Mi­ami, stepped into the gar­den of his tem­po­rary res­i­dence at the Bev­erly Hills Ho­tel in Los An­ge­les. As he does most morn­ings, he gave thanks for an­other day on earth. “Good morn­ing,” he said to no one in par­tic­u­lar. “Bless up.” DJ Khaled, as he’s more com­monly known, was once a mi­nor fig­ure in the mu­sic world, a cre­ator of ra­dio-friendly hip-hop hits and the host of a nightly show on one of Mi­ami’s top FM sta­tions. The rap on Khaled was that he could at­tract tal­ented col­lab­o­ra­tors but wasn’t much of a mu­si­cian him­self. “Mostly, he just in­ces­santly screams dumb catch­phrases,” one Pitch­fork re­viewer com­plained. “And he doesn’t even do that par­tic­u­larly well.” This sort of thing weighed on Khaled. The crit­ics, the haters, the peo­ple who’ve ig­nored his ca­reer—they didn’t want him to be in such a beau­ti­ful gar­den.

“I love my an­gels,” Khaled said, ad­mir­ing the red, white, and pur­ple cy­cla­mens at the ho­tel. He saw God in those peren­ni­als. He also saw a metaphor for his own life’s jour­ney. Khaled sees metaphors ev­ery­where, ac­tu­ally, ally, which is a ma­jor key—or as he prefers to type it out, “Ma­jor ”—to his suc­cess on Snapchat, the so­cial net­work where he has amassed some 6 mil­lion fol­low­ers since last Oc­to­ber. “Life is like flow­ers,” he ob­served, train­ing his iPhone cam­era at the ground and hold­ing down the record but­ton. “You grow. You blossom. You be­come great.” He posted the 10-se­cond video to Snapchat, then re­paired to his bun­ga­low to fur­ther phi­los­o­phize on the power of pos­i­tive think­ing, hard work, and the di­vine. That went out to his Snapchat fol­low­ers too, in a con­tin­u­ous se­ries of clips.

If you want to un­der­stand Snapchat, the in­sanely fast-grow­ing and—to peo­ple born be­fore 1990—straight-up in­sane mes­sag­ing app and me­dia plat­form, DJ Khaled is your Vir­gil. If you were one of the 100 mil­lion peo­ple who logged in to Snapchat each day dur­ing Su­per Bowl week­end, his thick beard and full frame were im­pos­si­ble to miss. You would have seen clips of him at an im­promptu con­cert where he was mobbed by sev­eral hun­dred scream­ing fans wav­ing gi­ant card­board keys, or at a rau­cous party spon­sored by Pep­siCo, or in a pedi­cab he hailed af­ter the game. “Ride wit me through the jour­ney [to] more suc­cess,” he cap­tioned that last video, as his chauf­feur ped­aled fu­ri­ously.

Khaled had never heard of Snapchat when a friend sug­gested he check it out last year. While tak­ing a break from tour­ing last fall, he gave it a shot. “I didn’t re­ally know how to use it,” he says on a re­cent af­ter­noon in Los An­ge­les. “I was kind of just talk­ing to my­self.” Khaled filmed ev­ery­thing: his groom­ing rou­tine, his break­fasts, his hot tub, and, es­pe­cially, a Tus­canstyle lion sculp­ture that he would of­ten shout at while wa­ter­ing his plants. Mostly, he gave ad­vice. He ex­pounded on the im­por­tance of qual­ity bed­ding (“The key to more suc­cess is to have a lot of pil­lows”) and reg­u­lar meals (“They don’t want you to eat break­fast”). His most dra­matic Snapchat mo­ment oc­curred dur­ing a twi­light ride on a per­sonal wa­ter­craft in Biscayne Bay. “The key is to make it,” he re­peated as he got lost on the wa­ter. Then he turned the cam­era on him­self and added, “The key is not to drive your Jet Ski in the dark.”

Khaled made it, and since that fate­ful night he’s been pretty much the hottest ticket in me­dia—the guy who’s fig­ured out the dig­i­tal prop­erty ev­ery­one wants a piece of but no one quite un­der­stands. He’s palled around with Snapchat co-founder Evan Spiegel, cre­ated Snapchat videos on be­half of Cîroc vodka, and signed a deal to host a weekly ra­dio show on Ap­ple Mu­sic’s flag­ship sta­tion, Beats 1. His catch­phrases have oc­ca­sioned ex­plain­ers from oth­er­wis­er­wis se­ri­ous news or­ga­ni­za­tions, in­clud­ing Time, Quartz, and— — Bloomberg Busi­ness­week. “DJ Khaled has com­pletely cracked the plat­form,” says Em­manuel Seuge, se­nior vice pres­i­dent for con­tent at Coca-Cola, one of Snapchat’s ma­jor ad­ver­tis­ers. “He’s the king of Snapchat.”

Com­pared with Twit­ter or Face­book,

Snapchat can seem al­most ag­gres­sively user-un­friendly. If you’re new to the app and look­ing for posts by your kid, your boyfriend, or DJ Khaled, good luck. It’s hard to find some­body with­out know­ing his or her screen name. This is by de­sign. “We’ve made it very hard for par­ents to em­bar­rass their chil­dren,” Spiegel said at a con­fer­ence in Jan­uary. “It’s much more for shar­ing per­sonal mo­ments than it is about this pub­lic dis­play.”

Spiegel, who de­clined to be in­ter­viewed, has been cagey about Snapchat’s busi­ness prospects. Its an­nual rev­enue is small—per­haps $200 mil­lion, ac­cord­ing to sev­eral press re­ports—but it has al­ready drawn many big-name ad­ver­tis­ers. Ear­lier this year, Pep­siCo, Ama­zon.com, Mar­riott In­ter­na­tional, and Bud­weiser paid more than $1 mil­lion to have their ads ap­pear within the com­pany’s Su­per Bowl cov­er­age, ac­cord­ing to a per­son fa­mil­iar with the deals. And be­cause Snapchat has yet to re­ally try to sell ads to the small and mid­size busi­nesses that make up most of Google’s and Face­book’s cus­tomer base, there’s a lot of po­ten­tial.

As Face­book has trans­formed from a slightly wild place to a com­mu­ni­ca­tions tool for par­ents, teach­ers, and heads of state, Snapchat’s more play­ful ethos, and the fact that any­thing posted on it dis­ap­pears in 24 hours, has made it the looser, goofier so­cial net­work. “You’re send­ing this ephemera back and forth to your friends,” says Char­lie McKittrick, the head of strat­egy at Mother New York, an ad agency. “It’s the de­tri­tus of life. But it’s re­ally funny.” Last Septem­ber, while Mark Zucker­berg hosted In­dian Prime Min­is­ter Naren­dra Modi on Face­book’s cam­pus, the big news at Snapchat’s of­fices in Venice was a fea­ture called Lenses, which makes your self­ies look like you’re vom­it­ing a rain­bow.

Snapchat is just the sort of place where DJ Khaled, in his un­in­hib­ited glory, could find an au­di­ence. Vice called his Jet Ski ad­ven­ture “the great­est sit­com episode ever filmed.” Elite Daily, the “voice of Gen­er­a­tion Y” news site, raved, “If You’re Not Fol­low­ing DJ Khaled On Snapchat Al­ready, You’re Bug­gin’.” In De­cem­ber, Khaled posted to Snapchat while get­ting his iPhone fixed at an Ap­ple Store. Soon he was sur­rounded by fans. “It was un­real,” he says. “My Snapchat has more view­ers than any TV show.”

That’s an ex­ag­ger­a­tion, but not by much. Khaled’s videos at­tract 3 mil­lion to 4 mil­lion view­ers each. Given how Snapchat skews over­whelm­ingly tween to late-mil­len­nial, that means about the same num­ber of young peo­ple are watch­ing him ad­mire flow­ers as are watch­ing the big­gest net­work sit­coms. Ac­cord­ing to Nielsen, roughly 3.3 mil­lion peo­ple age 12-34 watch The Big Bang The­ory.

Even big­ger than the videos posted by Khaled and Kylie Jen­ner—the plat­form’s other big star, with 10 mil­lion fol­low­ers— are Snapchat’s own Live Sto­ries. Th­ese are mashups of news events culled from the feeds of Snapchat users and pro­duced by the com­pany’s 100-per­son con­tent team of pro­duc­ers,

edi­tors, and a hand­ful of jour­nal­ists, who some­times add com­men­tary or con­trib­ute more footage. The big­gest Live Sto­ries seg­ments—for in­stance, New York’s 2015 Snow­maged­don and the Coachella mu­sic fes­ti­val—can draw view­er­ship in the tens of mil­lions. Snapchat Dis­cover, a col­lec­tion of slickly pro­duced feeds, at­tracts au­di­ences in the mil­lions. The com­pany says users watch roughly 8 bil­lion videos on its plat­form each day, about the same num­ber as Face­book, which has 10 times as many users as Snapchat. On a given day, ac­cord­ing to Nielsen, 41 per­cent of adults in the U.S. un­der 35 spend time on Snapchat.

“Ev­ery­body from 14 to 24 in Amer­ica, it’s ei­ther the No. 1 or No. 2 app in their lives,” af­ter In­sta­gram, says Gary Vayn­er­chuk, an an­gel in­vestor and en­tre­pre­neur. Ac­tu­ally, it’s not just an Amer­i­can phe­nom­e­non: Snapchat is a top 10 most-down­loaded app in about 100 coun­tries, ac­cord­ing to mar­ket re­searcher App An­nie. Vayn­er­chuk, who has in­vest­ments in Snapchat, Twit­ter, and Face­book, likens the ex­cite­ment to that of tele­vi­sion in the early 1960s. “The vast ma­jor­ity of peo­ple read­ing this ar­ti­cle will have a Snapchat ac­count within 36 months,” he says. “Even if, as they’re read­ing this, they don’t be­lieve me.”

Just a year ago, Snapchat was pri­mar­ily known as a dis­ap­pear­ing mes­sage app use­ful for send­ing nude pho­tos to

lovers and lewd doo­dles to friends. “The peo­ple’s champ of smart­phone peep shows,” this mag­a­zine put it in 2013. When Spiegel turned down a re­ported $3 bil­lion buy­out of­fer by Face­book, the then-23-year-old was mocked in the press and even by mem­bers of his own board. “If you knew the real num­ber” of­fered by Face­book, Sony Pic­tures Chief Ex­ec­u­tive Of­fi­cer and Snapchat board mem­ber Michael Lyn­ton con­fessed in an e-mail that was leaked as part of the 2014 Sony hack, “you would book us all a suite at Bellevue,” the New York hos­pi­tal with the fa­mous psy­chi­atric ward.

In late 2014, when Spiegel un­veiled the com­pany’s busi­ness plan—for a min­i­mum of $750,000, a big brand such as Coke or Pepsi could get short video ads to run in the app for one day—he was again de­rided for be­ing out of touch. “It’s like how the Kar­dashi­ans are fa­mous be­cause they’re fa­mous,” says Ben Win­kler, the chief in­vest­ment of­fi­cer for the me­dia buy­ing firm OMD. “Snapchat is ex­pen­sive be­cause it’s ex­pen­sive.” Of course, that’s an­other way of say­ing it’s ex­pen­sive be­cause lots of peo­ple want to buy it. “Al­most ev­ery editor has put me in a choke­hold to find out how they can get on the plat­form,” says Joanna Coles, the editor-in-chief of Cos­mopoli­tan, and since De­cem­ber a Snapchat board mem­ber.

Snapchat, which was most re­cently val­ued at $16 bil­lion,

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