There is an interesting article on adage about why Snapchat shouldn't engage in advertising. After they just turned down a $3B offer, they must have future plans to monetize the business. Most likely, that will be with advertising. The author of the article cites two reasons - a value gap and perception gap. The perception gap is that many people feel that Snapchat is used as a way for users to engage in "sexting". There are many other uses for Snapchat and I agree with the author that they can overcome this perception issue.
The other issue is of value. Digitally, advertisers enjoy the transparency of customer information. However, Snapchat is all about privacy which would make it very difficult to effectively target ads. The article gives a good example. Let's say a user sends a Snapchat an image of him and his dog. The purpose of that image is to be temporary and private. Therefore, it would not work to show that user any dog related ads or else they would think their privacy on Snapchat is in jeopardy. This would also make the site lose its credibility.
I agree with this article that it will be difficult for a company that bases itself on privacy to start inserting ads. They will have to use paid upgrades, subscriptions or added paid features for them to monetize customers. As cited in the article, switching costs aren't high for current users and there are many formidable competitors. It will be interesting to see how much Snapchat can increase its value proposition to users while starting to monetize its business.
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