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$29 Billion.. For SNAP?

Snapchat, or more precisely Snap Inc., has gone public today for $29 billion. The potential within the loss-making tech company has evidently interested the markets. Shortly after the bell rang Snap’s share price rose from its $17 guide to $24 where it is has stabilised. The Snapchat IPO day was a success.

Start-ups have had a rocky relationship with IPOs, Twitter raised $11 billion but has failed to impress. For good reason investors are weary of bubbles emerging from tech companies. Snapchat is actually making a loss at the moment.

  • In 2015 revenues were revenues $58.7m in 2015 in 2016 they were $404.5m
  • In 2015 losses were $373m and grew in 2016 to $514m

The company is not yet making a profit, but the dramatic growth in revenues suggests it will be soon. This money comes from the 158 million people who use Snapchat everyday to send billions of snaps. Snapchat’s multiple features generate a gold mine of data. There are two ways to increase ad revenues, sign up more users and create more signals to quantify. Facial recognition is amongst one of the most desirable emerging data fields in advertising. Companies and their clients need to know if we’re really engaged or merely chilling in the presence of media.

Facebook, Google and Snap?

All this could easily have never happened. How many start-ups in their early years accept the kind of offer from Google or Facebook you can’t say no to and enter into ‘the family’? Mark Zuckerberg made an offer for $3bn in 2013 for Snapchat. They refuse. So desperate were Facebook to get hold of this video application they went ahead and added to Instagram a very Snapchat-like feature.

The Snapchat IPO is the biggest techy launch since Facebook
Snapchat’s ghostly logo

While Facebook is worth more, $393bn, and have annual revenues of $27.6bn, nothing is certain. Zuckerberg has said video will be the future of social media. Perhaps Facebook has nothing to really worry about. Snapchat’s approach to using technology seems to run the other way from Facebook and their lifetime scrapbook approach.

“[Ephemereality is] why people love creating Snaps. Because there isn’t pressure to feel pretty or perfect. Self-expression isn’t a contest, it’s not about how well you can express yourself, it’s about being able to communicate how you feel, and doing that in the moment.”

Co-founder Evan Spiegel described Snap Inc. as a camera company. Their Spectacles offer an easy way to shoot point-of-view Snaps. The product didn’t really land right. Online sales for Spectacles were launched on February 20, so we’ll have to check back in a few months to see if there is anything beyond an IPO boost. Inventions like that still prove Snap has things it wants to do and a team capable of building things, now they have several billion dollars to work with they can start to work on more ambitious projects.

One product hoping to grow from the Snapchat IPO
They’re pretty incognito compared to Google Glass

The internet has turned rather sour. Whatever the legal and economic issues, which we can sort out if we try, Snapchat can become huge and co-existent with giants like Google and Facebook. Its the fun bit of the dystopia.