Snapchat is the darling of tech startups. After having the balls to turn down a $3 billion offer from Facebook, the company has struggled with many challenges. Some of the challenges involve generating revenue and maintaining its audience. By far its main challenge is dealing with the constant slew of lawsuits.
Ever wonder why Snapchat is at the heart of such controversy all the time? This article will show you why.
A Victim of its Own Success
Snapchat has become a victim of its own success. An enormous $19 billion estimate is an example of a unicorn company. It may already have a huge following, but the reality is the company hasn't generated a single dollar in revenue, other than an attempt at advertising last year.
The tech industry works like no other area of business. Unicorn companies are a firm example of this. Estimates are based on ideas and the potential of a company to generate revenue in the future, as opposed to anything it's doing now
Snapchat has fallen victim to lawsuits because it's seen as a prime target. People would love to extract a million or two in a frivolous lawsuit. A range of startups have experienced the same problems over the years. Whether it impacts them or not depends on the outcome of the company.
The company came under a huge amount of speculation as the Federal Trade Commission decided to investigate the company for misleading practices. The controversy came as it was revealed that the so-called disappearing messages didn't actually disappear at all and could be extracted from the app.
Many teenage girls fell victim to this as private and intimate photos found their way into the online arena. The FTC later dropped this investigation, but speculation has been widespread ever since.
Investor Troubles at the Back
Reggie Brown is a well-known figure at Snapchat. He was one of three co-founders to start the app. It was the same Reggie Brown who lodged massive legal action against the company. He claimed that he came up with the idea of having messages disappear after a few seconds. The company then forced him out and gave him no equity.
This lawsuit has dragged on for a couple of years, with the former partners reneging on any potential offers multiple times.
It's another demonstration of the chaotic world of startups and raising money. Many investors have had to deal with companies who are in the process of being sued by former employees and co-founders. This is one of the realities of working with a modern-day tech startup.
Sarah and Elizabeth Turner are another two well-known figures at Snapchat, but not because of what they did behind the scenes. In one of the earliest promotional images from the company, the two sisters are photographed having fun at the pool.
They claim that Evan Spiegel, a Snapchat co-founder, edited the pictures to make it seem more risqué than it actually was. It inadvertently led to the two sisters becoming the faces of 'sexting'. They sued the company and the legal case is still ongoing.
Like many people suing the company, they are interested in receiving a part of the profits. Whether they manage to succeed is anyone's guess.
In a recent statement by Esteemed Lawyers of America founder Andrew Stickel, he says "Former models for promotional material have successfully sued companies for their images rights before. At this stage, it is impossible to know how much the two sisters in question would be entitled to, if anything."
Who Came Up with the Idea?
Back to the Reggie Brown case again, this represents a common issue in successful companies with multiple founders. Who came up with the company's unique selling point? In the beginning, people don't really spend that much time thinking about it.
Nevertheless, when the company becomes successful this point becomes critical. The person who came up with the idea, if proven, could be entitled to a far greater share of the profits. Of course, this is notoriously difficult to prove and most cases are simply settled out of court, but it's a major headache for companies in this position.
Snapchat is no different, although the partners have since settled their case with a payout for Reggie Brown.
There's no doubt Snapchat will have to continually fight off lawsuits over the next few years. It's impossible to say how much of an impact this will have on the company, at least in the long-term. However, the same problems crop up time and time again for tech startups in the same enviable position as Snapchat.