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Snapchat Seeks to Raise as Much as $4B in IPO
- serg_chernata 10y agoWhen a company like Uber is raising insane amounts of money I think to myself - "ok, they're working on vehicle automation and other ambitious projects, it makes sense". When a company like snapchat is looking for 4B in addition to existing funding I am left completely dumbfounded. Can someone please explain why they would need this much cash?
- intro-b 10y agohey now those new filters won't make themselves
- adamnemecek 10y agoThey have captured an important segment of the market (12-2x years olds). I also think that people In this age group find it a ton more engaging than the alternatives.
- samfisher83 10y agoFB really made it when the captured the old people. The issue is the the 12-20 years are quite mercurial. 15 years ago it was AIM,MSN, Yahoo chat, then myspace, then facebook. Now its snap chat and instagram. Its hard to keep the market since when you get friend request from Mom or Dad do you really want to be in that social network anymore?
- delecti 10y agoI don't think 12-20 year olds are that mercurial, it's just a small age range, so in 8 years it will be an entirely new group of people. Fifteen years is nearly two full lengths of that duration, so it's no wonder that AIM/MSN/Yahoo aren't in use by the current 12-20 year olds. It's only very recently that I (a 29 year old) finally phased out AIM in favor of other channels. Once you capture a social group, it's fairly stable, there's just a constant stream of new social groups as each year's new 12-20 year olds start going online.
- argonaut 10y agoThat's the very definition of mercurial. In 8 years it'll be a new cohort with new tastes.
- delecti 10y agoThe 12-20 demographic is mercurial, but 12-20 year olds are not. Though really my point was this: it isn't the case that you need to continually re-grab the same users, it is the case that there are continually new users to grab.
- argonaut 10y agoIf the old users leave, then yes, there are continually new users to regrab.
- mrep 10y ago> The issue is the the 12-20 years are quite mercurial. I don't think we are mercurial but that we have less experience and therefore are much more willing to try new things. Snapchat is way better as an outlet to post more regular things you are doing to your friends because it is ephemeral. Why? Because we all look back and see all the stupid stuff we posted when we were younger. The only reason I haven't deleted my facebook to delete all of that old stuff is because Facebook's other offerings are pretty good. While I hardly know anyone that posts regularly to facebook anymore, almost everyone uses facebook messenger and groups to communicate in isolated groups. Snapchat has been blowing up because it fills that niche of "I want to post more updates about my life without really having to worry about how those updates will be interpreted in the future".
- samfisher83 10y agoI hope you don't believe that. You never know when someone saved something.
- deleted 10y ago[deleted]
- mrep 10y agoHave you never made a joke before that some random person might not like and get offended by it and try and attack you for it? Have you never said something that you have looked back upon and regretted saying it (whether you were just young and immature or just not thinking clearly)? Do you also not do those things over common communication channels outside of talking face to face? I'm genuinely curious because I literally don't know anyone under 30 that has never done anything that they did not want recorded in history forever. It's not that I have posted anything on facebook/instagram/snapchat... that is really that bad/embarrassing. If it were all posted on the front page of the NYT I would probably go through life just as normally (albeit, quite a bit embarrassed by it). I would just prefer to minimize that risk. That's where snapchat fills the niche. It allows me to speak more freely with others with less fear that everything I say and do will be pulled up years later completely out of context.
- cstejerean 10y agoSure, but what precisely are they planning to spend $4B on?
- TAForObvReasons 10y agoBuilding a war chest to purchase the next company or act quickly. You need to have the cash on hand, and that can't happen overnight. They need not spend the money today.
- josho 10y agoThat's typically a bad reason to give to an investor.
- CN7R 10y agoConsidering Snapchat revealed Spectacles, which in my mind was an unexpected hardware development, they could use funding for side projects and expansion. Hopefully, they don't become like Twitter and waste all that money for so little gain.
- adamnemecek 10y agoI'm pretty sure that they will write these off evetually. To me they feel very similar to Google glass insofar the customer bases being somewhat similar, maybe spectacles' being somewhat younger.
- CN7R 10y agoIMO, Google glasses were an obtrusive form of eyewear with limited AR capabilities—with a price tag of $1500. Spectacles are $130.
- adamnemecek 10y agoYou are right they are quite a bit cheaper but they are just as obtrusive. I think that glasses (esp. dioptric) are fundamentally a part of your identity and I think that most people fundamentally hate associating themselves with a company not to come across as a 'fanboys'. Like wearing the snapchat glasses projects a certain type of persona which I think most people might prefer not to project. I think that they should be marketed as "cool glasses (that also record video)" as opposed to "video recording glasses". "Video recording glasses" are a gimmick, "cool glasses (that also record video)" could be timeless.
- flukus 10y agoIs it that important? That age group isn't known for it's disposable income.
- kak9 10y agoUber does not need the amount of money it raises because of vehicle automation. That's a relatively tiny portion of their spend.
- chejazi 10y agoWhere is the bulk of their spend? Hiring? Lobbying local jurisdictions?
- TeMPOraL 10y agoI would imagine the latter. Conducting an illegal business in the open must be expensive.
- CN7R 10y agoSubsidies for drivers as Uber attempts to expand market shares overseas and maintain dominance over domestic competitors: https://www.bloomberg.com/news/articles/2016-08-25/uber-loses-at-least-1-2-billion-in-first-half-of-2016 https://www.bloomberg.com/news/articles/2016-08-25/uber-lose... Honestly, the China gamble Uber had earlier this year shows me that they're spreading themselves too thin.
- necessity 10y agoSnap is working on Spectacles and other "real life" projects.
- bcherny 10y agoHopefully someone can chime in with actual numbers, but (1) engineers/designers/product, (2) marketing, (3) servers/infrastructure.
- wmeredith 10y agoSomeone has to be the next Twitter.
- onewaystreet 10y agoIt's better to raise more than you need when you are in a position of strength.
- DenverR 10y agoIt's less about raising funds and more about liquidity for current shareholders
- AndrewKemendo 10y agoThe engineering community is sleeping on Snapchat, but shouldn't be. My life is AR. I'm the CEO for an AR company, I speak write and live and breathe all things AR. Snapchat is poised to be the most important AR company around for several reasons. 1. They have a MASSIVE userbase that is comfortable with sharing their lives 2. That userbase has already shown an interest in AR - and yes whether you like it or not their filters are on the AR spectrum - the filters system maps, tracks (SLAM) and modifies in real time. Their Spectacles release has the potential to build the largest real world image dataset on the planet - something needed (for reasons I won't go into) for AR everywhere. Think on the order of 1.8 Billion images per month with depth data from the stereo cameras (30FPS * 10 sec snap * estimated 20 snaps per day * estimate 100k spectacles users in first month). Most people have no clue what is going on in the AR world, and I can tell you Snapchat is going to be formidable. If they can invest in a VRD, then they could win the whole AR market, but they need to raise more than 4BN to do that probably.
- neosat 10y ago"Their Spectacles release has the potential to build the largest real world image dataset on the planet" With Google (and now Uber) cars driving around numerous places to capture data specifically for map imagery, satellite imagery and Android/iOS phones taking tons of photos + videos I highly doubt Snap will be the one to build the world's largest image dataset. The rest of your argument makes sense though.
- AndrewKemendo 10y agoWith only 100k users they would generate approximately 9BN images per month (30FPS min, 10sec Snaps, average 10 snaps per day). With 1M users of spectacles (.6% of their current MAU), that's potentially 90BN images per month and over a trillion per year. In the same dataset. Machine vision wet dream.
- icelancer 10y agoThere is no way the average user is shooting full 10s snaps 10x day. I use Snapchat regularly and that describes the top eschelon of users, which might be Spectacles users, but probably not all of them. I believe that is a vast overestimate.
- jsprogrammer 10y agoHave you seen their investor roll? Do you think they are sitting around looking for a 500m exit?
- mountaineer22 10y agoIt gets more eyeball time than television.
- matchagaucho 10y agoThe number of IPO shares floated and underwriter fees have more influence on the amount raised. It's not entirely driven by need.
- vit05 10y agoThey will use that money to buy other startups. As they have done with the company that have created their glasses 2 years ago, the one that created lens etc.
- PartTimeZombie 10y agoThe key line to me is: Morgan Stanley, Goldman Sachs are leading the offering They are the people who will the make the real money. They always do.
- qwrusz 10y agoYou are right that $4B from an IPO is technically another fundraising round. However, an IPO is a special case, as for years now a company/its board will consider an IPO as a business strategy decision and not as fundraising per se. Big shift in the 1980s. There are some legal/regulatory aspects to an IPO and "liquidity event" type reasons an IPO is treated differently too. Basically, an IPO brings many pros and cons with it. A company may choose to IPO even when it doesn't need the cash or even want the cash. The money raised is just a byproduct of choosing this particular business strategy. (An analogy in pre-IPO startups: A startup may take an investment from a famous or influential VC even though the startup doesn't need the money at that point. Rather they look at it as a business decision because the startup really wants some other benefits they can get from having this famous VC as an investor. e.g. mentorship, network connections or even just more legitimacy by association... Lots of VCs provide non-cash benefits but you have to take cash to get them.) As for how did Snap Inc. get that $4B number. That's complicated and not even an official number. But a simple answer could be if a company's current private valuation is ~$40B and they want to IPO for strategic reasons but only sell off/dilute as little as possible while still looking respectable. They won't IPO only 1% of the company, too little, 10% is a respectable minimum. 10% of $40B = $4B. Total speculation and just an example. But hopefully you see you are right to ask questions when these companies IPO as it's full of smoke and mirrors with a different story behind the scenes.
- cblock811 10y agoI have yet to speak with anyone who thinks Snapchat's valuation is realistic and that their business model will sustain them. When I see this I just think of Twitter all over again. I would love to hear arguments supporting Snapchat though.
- deleted 10y ago[deleted]
- adamnemecek 10y agoI think that part of the reason twitter is doing the way it's doing is the less than stellar user engagement. AFAIK snapchat is killing it on that front. Idk if that justifies the valuation but I do see the general public a lot more pumped about it than I've ever seen people pumped about Twitter (ymmv).
- ethanbond 10y agoUser engagement doesn't pay the bills.
- TeMPOraL 10y agoWith enough ads, it does. (And you can also try and leverage it to get VCs to pay your bills.)
- cstejerean 10y agoWith enough ads user engagement also goes down. If Snapchat pushes it too far it will drive users off the platform and onto the next "cool" thing.
- adamnemecek 10y agoI think that to some extent decrease in engagement due to ads is a constant. Some engagements are larger than others and can handle that decrease.
- TaylorGood 10y agoFWIW, have only opened Snapchat once since IG Stories debut.. 28 and consider myself tech savvy. That being said, the only defense it seems Snapchat has is their "instantaneously direct messaging" i.e. being able to send to one person at a time. When or if IG does this, well...
- jdc0589 10y agoIG has this. I got a direct message from someone last week.
- flanbiscuit 10y agoIt's not the same way that Snap does it though, but I could be wrong because I haven't gotten a dm in a while. From what I remember, IG's diret messages look like one long chat between you and the person. Snapchat has 2 separate direct messaging paths, one is your basic chat log and the other one is sending snaps to a single person, which is what I think @TaylorGood was referring to
- TaylorGood 10y agoRight - with instagram it sticks. That's an update away from being 100% Snap-like.
- ProAm 10y agoDidn't a company offer to buy them for 4B a few years back?
- CN7R 10y agoFacebook, for $3 bn; Google, for $4 bn. Both offers were declined.
- samfisher83 10y agoThey will raise 4 bil putting their valuation at 25-35 billion.
- dbg31415 10y agoSo more ads?! That's what funding means, right? Man, I just wanted to send dick pics...
- neals 10y agoMake an ad of yours! You can really target that audience with an ad!
- taytus 10y agoI'm a professional photographer and even when I had a medium audience on Snapchat (1000-3000 views/snap), I switched to Instagram stories. For content creators Snapchat is not good at all. The discoverability problem they have is a serious issue for me.
- philfrasty 10y agoHow do your Insta stories compare in terms of views and view-through-rate? (I am in the same situation as a content creator on YouTube using Insta/Snap on the side)
- taytus 10y agoNot a lot of people use it yet. I have about 16k followers on IG and an average of 500 views/story. I feel that once IG (if ever) start adding more filters, people will use it more heavily.
- niftich 10y agoI'm surprised (rather, disappointed) that the article doesn't make any comparisons to Facebook's IPO. For today's 14-to-25-year-olds, Snapchat is the new Facebook, in terms of user engagement, market penetration, mindshare -- so it stands to reason in terms of valuation it would be too. There are some important differences, of course. Facebook owns multiple properties that mount competition to Snap Inc: Instagram, Messenger, Whatsapp, the original Facebook; Snapchat subsumes all these usecases in a single app that you'd be hard-pressed not to find on a teen's phone today. And it does so by making it optional to curate a permanent, indexable, discoverable, idealized public identity. To many, that's strictly better than anything Facebook has put out -- a company that nonetheless commanded a high valuation, performed an IPO (albeit rocky), and now posts a strong profit.
- nemothekid 10y ago>There are some important differences, of course. I'm surprised you wouldn't bring the biggest difference - the data. Facebook had tons of user data, even at their IPO, while Snap has relatively little.
- niftich 10y agoFacebook owns PII data -- data the user attests -- and user engagement data. Snapchat just has user engagement data -- data derived from the user's behavior. This is a notable difference, but frankly, at this point in time it doesn't matter: every potential advertiser worth their salt knows that the average Snapchat user is between 14-25. Both services usually know location. To many advertisers, the Facebook ad platform's sophisticated audience analysis isn't so much value-add as a way to prune people unlikely to be interested from being shown your ads. This is why the comparisons between Snapchat and MTV are apt.
- jpalomaki 10y agoProfile information can be useful for the platform itself, since they can use it to target specific ads to people who are most likely to engage with them (watch video, click through or do something else). Since there is only limited space for ads available, being successful with this might be quite important.
- sssparkkk 10y agoI see talk of Spectacles being Snapchat's next big thing. However, 90% of the time the popular Snapchat users are filming themselves. Not what they're seeing. So what good would Spectacles be for them?
- hornbaker 10y agoThemselves in the mirror, duh.
- babesh 10y agoThere's a sales technique where the first person to state a value causes other people to pick values around it. So Snapchat struck first and says that they are worth 40 billion. Minions listen to that and think that 35 billion would be a bargain.
- grdvnl 10y agoI think you are referring to this effect: https://en.wikipedia.org/wiki/Anchoring https://en.wikipedia.org/wiki/Anchoring
- maxlamb 10y agoYep, and that sales technique is based on the well studied cognitive bias named anchoring: https://en.wikipedia.org/wiki/Anchoring https://en.wikipedia.org/wiki/Anchoring
- harryh 10y agoIt doesn't really matter what millions think Snapchat's valuation should be. The vast majority of shares bought at IPO will be from a relatively small number of institutional buyers capable of sophisticated financial analysis.
- babesh 10y agoTheir backers and they stand to make money by hyping it up. They are working their channels to get puff pieces written. Not one article I have read is critical of them. Shows you the power of their backers. Doesn't mean you should invest but I bet their backers are powerful enough to make that stock pop the first day.
- shogun21 10y agoJust speaking personally, but I thought the hype around Snapchat was on the decline. The app seemed to get slower with every update and people within my social circles weren't using it as much as a few years ago.
- thomasthomas 10y agodont forget about sponsored filters. should be a boon for sc. organic marketing. would bet this revenue surpasses sponsored stories. comparisons to fb and twitter are a little off. SC is more of a messaging service than social media Evan Spiegel isn’t building the next Facebook or Twitter. To some that may be obvious, but it’s important to understand. That’s because Spiegel is driven by the idea that people are looking for alternatives to their curated Facebook and Instagram personas. It’s not a social site, it’s a communication app with a large dose of entertainment on the side. if youre complaining about discoverabilty you just dont get it and thats OK [1] http://www.recode.net/2016/5/9/11594144/evan-spiegel-snapchat http://www.recode.net/2016/5/9/11594144/evan-spiegel-snapcha...
- tomashertus 10y agoI'm passive and light user of Snapchat, because I'm following around just 40 people and sporadically use it for messaging. I was really enjoying the Snapchat stories, much more than the messaging. I actually think that the whole messaging experience on Snapchat is pretty poor. Anyway the point is, that I used to have around 30 stories a day to watch before Instagram introduced their stories. Currently I'm around 10 a day and most people who are on Insta and Snapchat prefer Instagram. Is that just me, or you see the same decline in usage of Snapchat stories?
- oneplane 10y agoIt's 1999 all over again. Welcome to the .com bubble 2.0.
- artursapek 10y agoCan't wait to buy Snapchat puts
- mrep 10y ago25-35 billion dollar valuation, and Facebook started at a 100 billion and is now at 373 billion. Is there revenue/profit going to blow up? I have no idea but the thought that it could become the next Facebook will probably cause the IPO to pop. I would probably wait for some more concrete data before you invest a lot of money on it as I can see it being equally likely that it will become the next Facebook or the next Twitter.
- deleted 10y ago[deleted]
- komali2 10y agoI tried to get back into snapchat last week. "Surely they've made the Android app usable by now." Why is the android app so trash? Why is the UI so convoluted? I want to like and use snapchat because clearly everybody is "getting" something that I'm not, but I genuinely cannot figure out the UI or take more than a few pics without the thing crashing.
- iamdave 10y agoAsking genuinely here, but what exactly is 'convoluted' about it for you individually?
- bennettfeely 10y agoI would second that question. I just tried and it takes exactly 4 taps to capture and send a photo or video to someone else on Snapchat for Android (I'm fairly certain the UI is the same on iOS).
- Pengwin 10y agoHere are a few things that I experience on android. -When snapchat is foregrounded my phone wont go to sleep. -Sometimes the camera will just go black, hang, and crash the entire app. I don't know why, im guessing it could be filters. -Taking a snap with a filter applied sometimes just takes the photo without the filter. -The memories section is useless, and seems to only exist to keep pictures out of my freely accessible storage. -Adding things to the images like text or smilies is okay for a single item, multiple things on an image becomes very cumbersome with you resizing things you didnt want to resize. -the main inbox screen is very cumbersome, tap views a snap, sometimes it lags, and i tap again, only for it to show me a snap for less than a second and disappear. Double tap replys if you just viewed a snap, If you don't double tap perfectly it may think you want to swipe right to chat. -Inbox keeps getting slower, I get instant push notifications and tap one to go to my inbox, only to wait 2-3 seconds for the inbox to update, sometimes on top of that it hasn't even received the data and i hate to wait for that too. -Chat and text messages are stupid, You will lose messages because you swipe back to your feed the exact time someone sends you a new message, and kaput the text is gone forever, sometimes messages stay and sometimes they don't and i cant figure out why. I used video chat once and it was a horrible and laggy experience, one which i've never tried again. -Stories are starting to add ads, which i understand, but the comic event where "the ads load faster than the real content" happens. -If a story hasn't downloaded the next snap, the app just stops responding until it is downloaded and ready. Most of the time it will register any tap in that frozen state and will skip the snap when the picture/video is finally loaded. -a few controls like text/drawing color are 1-2 millimeters wide on some phones and makes selecting them infuriating.
- fowlerpower 10y agoI can't wait to buy. This one is going to be a good one even if most of the juice has been squeezed by the time it IPOs. I think people are really hungry for some tech stocks with the kind of brand SnapChat has to invest in. There will be naysayers, Facebook had those but boy did people make a lot of money.
- intrasight 10y agoI see a bag of hurt on the horizon here. Even with their nascent AR stuff, there's just not enough magic sauce to justify that valuation.