Yik Yak was never going to succeed.
Yik Yak hit its peak in the fall of 2014 when I was a junior in college. At just over 2 million MAU, they were being called the next SnapChat (~80 million MAU at the time). But anonymity does not encourage growth. It encourages the type of behavior that fosters negative communities. The reason why networks like Facebook and Twitter will never add a ‘dislike’ button is the model that Yik Yak became successful with. Applications that become popular by cycling drama and rumors quickly attain rapid growth, engagement, and other great statistics to get those big VC checks, but this comes at the cost of having a functional business model. Not a single person I talked to thought that Yik Yak had a viable long term model, yet big VC firms invested in them with $73 million at a $400 million evaluation.
These investments came to Yik Yak without any clear streams of revenue. For every other social network, advertising is the vague-but-clear answer to make money. But when all of your users are anonymous, how targeted can you really be in the advertisements? This is the same advertisement problem SnapChat has had to overcome, but even more severe. Millennials are a very diverse group of people, so to blanket them together into one big advertising group is severely out of line.
So why did VC miss something that any business school student using the app didn’t? Did they just get caught up in the trends, stats, and media attention just like everyone else? Trendy is not a business plan, and definitely not worth a $400 million evaluation.
Also published on Medium.