20 ms·

Snapchat has reportedly filed confidentially for its massive IPO

222 points by coloneltcb 10y ago

Tepix 10y ago
Could someone explain a) Why they need so much money? Don't tell me it's to produce some spectacles b) Why they are worth so much? I get that they have an interesting user base (young people), but they are having a hard time making money, aren't they? That $19b WhatsApp purchase hasn't exactly earned a lot of money yet, has it? It's still a very long bet, especially with Facebook being forbidden to collect the data now in some countries.
- JonFish85 10y ago
  a) Why they need so much money? "Need" is probably the wrong word. I imagine they're trying to maximize their return: sell enough stock to make lots of money, but not so much as to flood the market. b) Why they are worth so much? That's the question, and it really does boil down to "they're worth what people will pay". One side might argue that it's a game of musical chairs--someone assuming they can find a greater sucker to buy into it for more money down the road. Another side might be that they have a massive user base of people just starting to make money (high school & college graduates) who are willing to spend $5/mo on stickers and filters and stuff, as well as watch some ads. If they can effectively maintain their audience (a huge "if"), they will make lots of money. If they lose them to the next funny app, then they'll be a gigantic bust. So far they've continued to grow.... (Personally I think they're trying to IPO before the bottom falls out, but hey, what do I know)
- sfaf 10y ago
  a) To build an ad business capable of handling $100m of ads. You need massive investments in sales, infrastructure, tools, etc. to build a business like that b) They have one of the fastest growing user bases in the social space, their users spends an astounding amount of time on the app (estimated at 30 minutes per day), and their user base is the most targeted demographic for demographics. Also they have literally barely turned on the advertising machine and their initial forays have already hit a revenue run rate of $300M+. So essentially they have a shitload of eyeballs, the eyeballs are growing massively, their eyeballs spend a lot of time on their app, and advertisers love those eyeballs. Their business valuation is based on massive potential, not current revenues, but their advertising efforts already show huge promise. There is almost no startup with anything close to their engagement, growth, and monetization potential and the last company that looked like them was Facebook. Hence, the HYPE.
  - BurningFrog 10y ago
    I wonder if the user base that rushes in so fast to Snapchat might not rush as quickly to the next cool app, whenever it pops up.
    - jandrese 10y ago
      Especially once it starts getting cluttered with annoying ads. Or when Mom and Dad discover it and try to move in.
      - nv-vn 10y ago
        The way Snapchat is designed is basically anti-Mom-and-Dad -- you get to choose who each message will go to specifically (like texts), and everything disappears after it's been sent or opened. For a parent trying to monitor their kids on Snapchat, there's really not that much you can do.
  - MaxLeiter 10y ago
    As a teenager, it's almost constantly open on everyones phone - I wouldn't be surprised if I have it open/constantly checking it over 5 hours a day.
    - nv-vn 10y ago
      Agreed. As a relatively light user (relative to friends), I easily spend hours a day with the app open. It's easily the most popular app for people in the teenage demographic, and anyone who's spent any amount of time with teenagers will realize this.
  - monkmartinez 10y ago
    To your point b... so it's all about bubbles? A race for eyeballs before they disappear to the next "new, cool" thing? Because advertising isn't working for the people that sell "things." If social networks are supposed to create spending/buying in retail (both online and meatspace) they are not doing a very good job. Google: Retail sales 2016.
- binalpatel 10y ago
  On a - I have no idea. On b- Not sure if it's worth $25 billion, but I have noticed that it is the "Facebook" for younger generations, and that when they use it, they use it all the time, not just a few times a day like other social media. It's a way to share their lives - in real time - with their friends and followers, and have their friends do the same. (Look at me sounding like an old man!)
  - monkmartinez 10y ago
    That isn't "old man" that is practical thinking. Kids don't have any money!!!!!!!!!!
    - ethbro 10y ago
      But kids do have income increases and their highest years of earning ahead of them. That has to be worth something.
      - majormajor 10y ago
        How visible are AOL Instant Messenger ads to you these days? ;)
        ethbro 10y ago
        Point. But I'm not going to discount the non-zero effect they likely still have on my reasoning for choosing certain brands when all else is equal.
        gotrecruit 10y ago
        that's a fundamental misunderstanding of marketing. you probably subconsciously remember some of the ads, and even assimilated some of those messages into your psyche without realizing it. these probably manifest in ways like when you want to buy something and can't help but seem partial to a particular brand even though you're not sure why.
      - monkmartinez 10y ago
- hkmurakami 10y ago
  Re: WhatsApp. WhatsApp was a possible existential threat to FB (usage moving from streams of posts from many many "friends" to more direct conversation in smaller chat groups), so $19B when spread across the many years of "non-death" of the company can be recuperated even if they don't earn a dime from WhatsApp thereafter.
- kevando 10y ago
  I won't tell you to 'produce some spectacles' but Snapchat has been incredibly blunt about their goals. They claim to be reinventing the camera, and with AR, that probably means lots of R&D $. So probably not spectacles, but their next camera products.
- pplperson 10y ago
  a) also for r&d/acquire technology for AR/VR, we're just getting a taste of where they can go
  - johngrefe 10y ago
    Need, as in, they couldn't capitalize enough for spectacles to be on store shelves for xmas. Obviously, something is very wrong.
- pfarnsworth 10y ago
  "Need" money? You mean "want" money, right? And there's no wrong reason to want money since this is the US. Maybe he'll turn into a huge benefactor like Bill Gates and return all that money back to charitable foundations, etc.
- banusaur 10y ago
  A) They have the capacity to deliver state-of-the-art technology and can easily dominate with a surge of money for mass-production of electronics. On a whim they could deliver unparalleled face recognition for instance: https://hackernoon.com/is-snap-inc-building-a-wearable-face-recognition-device-for-the-nsa-94bc12aef06e#.pl3za65d3 https://hackernoon.com/is-snap-inc-building-a-wearable-face-... B) They're worth so much because on any given day, the app reaches 41 percent of all 18-to-34-year-olds in the United States. They have amazing potential as a platform for advertising, recruiting, sales, and so much more. They're probably not making money yet because they're not done honey-potting everybody like Facebook circa-2008. You may be right about a bloated WhatsApp $19B price, because the Snapchat data is much more valuable and going for $4B.
  - duaneb 10y ago
    Is there any indication they can monetize their audience? Twitter claimed to. How is snapchat different?
    - banusaur 10y ago
      They have the ability to monetize unexplored territory like face recognition and AR in real, meaningful ways. They've built an amazing technical team and are in position to execute on ideas that could have an incredible impact on the way humans interact in real life. They are among a few tech companies whose tech could cause a cultural paradigm shift akin to what we saw with the introduction of the smartphone. This should be an exciting couple of years.
      - duaneb 10y ago
        While I agree they are working on cool things, this is entirely separate from an ability to monetize it. This is the part I doubt; I don't see anything that indicates they would succeed where twitter failed.
        nv-vn 10y ago
        AR filters are huge on the app. Being able to use them as advertisements has already proven successful.
chollida1 10y ago
Really interested in learning if Snap is more Facebook or Twitter. This could be a big litmus test for the tech IPO. 2 things I'm very interested in: 1) If the rumors are correct that they are looking to raise 4 Billion at a roughly $40 Billion valuation. If you assume that their absolute pie in the sky max valuation ever is similar to what facebook is now, roughly 340 Billion, then that's not alot of upside for investors for a company that probably isn't yet profitable. 2) I've heard that the founders have locked up voting control. I'm always half watching companies like this to find out just how far they can push wall street before wall street says no more. Mark Zuckerberg and the Google founders have done a great job of managing their companies while maintaining voter control. I want to see a tech company where the founders own voting control but manage the company like Twitter, this is not a positive reference. If Snap get's their rumored IPO price but can't grow revenue then they could be the poster child for SEC minority shareholder reform, but then again President Trump has said he wants to remove regulation in the markets so..... Twitter had a very dedicated and professional audience, journalists, investors, etc who used their product and they couldn't live up to expectations. Snap now has to better than twitter and they'll have to do it by taking advertising dollars from Google and Facebook. That's a tough fight to get into.
- serge2k 10y ago
  > the Google founders have done a great job of managing their companies while maintaining voter control. They moved aside and let Schmidt be CEO for a while though, because Page was not ready.
- tenpies 10y ago
  I wish we could get some visibility as to how many Snapchat users are adult content creators. This is a segment that everyone seems to ignore, but I think we would be surprised to learn its scale and the amount of money flowing through it. It's also probably the group of users which most use Snapcash and driver huge numbers across all metrics.
  - Jordrok 10y ago
    I would be very interested to know this too, but of course it's all technically against the ToS[1] and so I doubt Snapchat will ever even acknowledge it, much less give numbers on it. Don't want to offend those delicate advertisers! [1] http://www.dailydot.com/debug/snapchat-porn-banned/ http://www.dailydot.com/debug/snapchat-porn-banned/ (The article is over a year old, but not much has changed since then.)
pplperson 10y ago
Maybe someone can enlighten me. I read awhile back (when the rumors just started) that a company can not engage in advertising/marketing in the pre-IPO period. If that's the case I assume the timing of Spectacles release is a way around that?
- rpedela 10y ago
  Do you mean any and all advertising or advertising for the IPO specifically?
- carlosdp 10y ago
  They cannot make large product announcements or changes in the "quiet period" between when the IPO is publically filed and when it goes live. This is a rumor of a private filing, not the public filing, so yes Spectacles are well in the clear. You can make large announcements right up till the day the IPO is published on the SEC website. This is because you are not supposed to solicit people to buy your shares before it goes public.
taytus 10y ago
I'm a professional photographer with about 16K + Instagram followers. I used snapchat to stream behind the scenes photos and videos and retouching tutorials, but that was a black box. Yes, I had comments open and I interacted with my friends and fans, but I couldn't tag anyone, or hashtags, discoverability is a serious issues in that platform. I started using Instagram stories and now I have the same views per snaps that I had on snapchat plus now I can tag brands/models/makeup artists/ etc. Instagram is going to EAT snapchat, specially for content creators discoverability is everything.
- ardeay 10y ago
  I don't think that is snapchats appeal
- kevando 10y ago
  MAGNIFICENT analysis.
  - taytus 10y ago
    I'm fully aware this is anecdata. But I can tell you I'm not alone on this. I just shared my experience. Sorry.
    - ProAm 10y ago
      People dont want to be tagged on snapchat, their audience likes exactly the opposite.
      - taytus 10y ago
        You are right. The point I'm trying to make is that brands (and some people) wants the opposite. It would be perfect if at least we had some option to allow tagging or something like a business account. On instagram stories now you even can have a link to an external page!
        10y ago
kevando 10y ago
Maybe I'm alone here, but I love the way Evan and Snapchat, er Snap, communicate as a company. They are incredibly tight lipped, but also very honest and blunt. They've talked about this IPO for years, and made no secret about becoming a camera company.
- pimlottc 10y ago
  On the other hand, I find it extremely annoying how Team Snapchat routinely sends elaborately animated pre-prepared snaps that are impossible to make in the official app. Eat your own dogfood, guys!
  - pritianka 10y ago
    I agree with you on this one. It feels unfair!
  - kevando 10y ago
    Interesting.
- WheelsAtLarge 10y ago
  I agree. Tight lips with "information leaks", makes for an intriguing situation. Apple is the master at this. They never announce anything but the media's love to search for information(mostly useless, if not leaked by the company's communication's dept) gives then a ton of constant publicity - very smart.
- partiallypro 10y ago
  If they really plan to be a camera company then this stock will be the next Twitter, but possibly worse.
- photogrammetry 10y ago
  You might love it, but the rest of us really don't.
WheelsAtLarge 10y ago
Can some one tell me why they use "confidentially"? When they have been talking about this for months and everyone in the tech/social business knows about it. I guess it's confidential since they didn't blast fireworks and cannons. Anyhow, I say that they will soon(if not now) be known as the cool social network while Facebook will live as the old but reliable techie social network , similar to the Apple/Microsoft delineation.
- lesdeuxmagots 10y ago
  Its a type of filing. Confidentially means that we cannot go so EDGAR and look up the filing right now, and they will not need to disclose the documents publicly until very close to the actual IPO. This is a relatively new type of filing that was introduced in the JOBS act, designed to encourage emerging businesses to go public. You can read about the specifics here: https://www.sec.gov/divisions/corpfin/guidance/cfjumpstartfaq.htm https://www.sec.gov/divisions/corpfin/guidance/cfjumpstartfa... Normally, if the company does not qualify for confidential filing, we would be able to go and see the draft S-1 on EDGAR 6 - 9 months in advance of the actual IPO.
  - WheelsAtLarge 10y ago
    Thanks, very informative.
- jonnyy 10y ago
  It reflects a change in IPO filing law. Quoting Wikipedia: "Under the JOBS Act, it has been possible since April 2012 for "emerging growth companies" to file a Form S-1 on a confidential basis, only making the contents public 21 days prior to the road show for the IPO." With many IPO filings, the financial docs are immediately available to review. Because Snap filed confidentially, we are not given access to these docs until shortly before the actual sale of the IPO shares.
johngrefe 10y ago
So people are super hyped about the Snapchat Spectacles. I get the excitement, they are Google Glass at a proletariat price, so owning them doesn't make you a GlassHole. Snapchat is one of the most popular LA Unicorns. Everyone is waiting for them to go public. So how did they release their big hardware add on? Limited time vending machines. They are spinning it as cool, but with XMas, their supposed capitalization and user base, it's a pretty big warning that these are not released through a consumer channel. They are probably experiencing major headwinds keeping them out of commercialization, or a major cash crisis. I'm want to side with the cash crisis. I'd love to be proven wrong, but I don't think their balance sheet is going to be very strong, if the fundamentals were there, Amazon and Best Buy would be distributing the product. Sure, tell me its a marketing strategy for exclusivity, I agree, it's great. It should have been done over the summer, moving into store shelves last week for Xmas sales.
- deepnotderp 10y ago
  My personal hypothesis on this is that they're eating a loss at the price range right now and are trying to figure out if people are interested in the spectacles and at what price.
  - johngrefe 10y ago
    I've scanned through twitter, they have users driving hours to try to buy them. I'm confident people are super excited. Being in the consumer electronics space myself, it takes about 80% of expected sales as capital to get anything into commercialization. This is just throwing huge flags for me as an investor.
  - huac 10y ago
    They'll probably create different models for different price points. Capturing the teen market is more important than the tech yuppie market, but if you can gouge a willing audience, you probably should.
  - usrusr 10y ago
    If anything they are creating a whole lot of media buzz, likely to be perfectly timed ahead of their IPO. The message isn't "we have head mounted cameras, head mounted cameras will dominate the world", the message is "we are more than just another entry in the endless stream of icq successors, continue to expect the unexpected". This might turn out to be more valuable to founders and VCs than the total hardware cost of the first few batches of camera sunglasses. For that function, the final spectacles price could be purely a balancing act between looking financially responsible to future investors and not deterring consumers to much, with no relation to hardware cost at all.
manishsharan 10y ago
Yet another platform to tickle our narcissism and voyeurism. The fact that this kind of innovation is so lucrative make me despair. And also, get off my lawn !!
- Apocryphon 10y ago
  At least you can't create news filter bubbles or troll with Snapchat.
  - st3v3r 10y ago
    Maybe that's why it's so popular. Most people are fed up with trolling.
Apocryphon 10y ago
To anyone on HN (or elsewhere) who doesn't get Snapchat, revisit Justin Kan's explanation: https://news.ycombinator.com/item?id=10859860 https://news.ycombinator.com/item?id=10859860
- patorjk 10y ago
  Looks like the blog post linked in that thread now gives a 404.
  - __derek__ 10y ago
    Here's the correct URL: https://justinkan.com/why-i-love-snapchat-23d31ea87d3c https://justinkan.com/why-i-love-snapchat-23d31ea87d3c
brilliantcode 10y ago
> $250 million and $350 million this year, according to those documents. That's pretty impressive but is it a sustainable source of income? Seems like this socio-consumer space is extremely volatile. Facebook & Twitter was the last platform I interacted with....3 years ago. Haven't even used instgram, vine, now snap chat. The fact that billions of dollars were spent buying out instagram, whatsapp, I wonder how facebook is aiming to make back all that cash expenditure. Linkedin barely gets a pass because it's enterprisey and Microsoft validated by buying it out. Take my view with a grain of salt as I consider these social networking type of websites our generation's "cigarette" -everyone is doing it and nobody wants to stop and examine it's impact on the quality of your life. I guess when everybody is around me is so concerned with the avatar version of themselves online and how they think they are perceived, therein emerges a divergence of values and attitude towards such mediums and the type of personalities it generates that leaks into real life (which I steer away from).
samfisher83 10y ago
I realized that facebook had made it when old people started using it, and I don't mean silicon valley old, but like for real old. Snapchat hasn't hit that threshold yet. It could be the next myspace of facebook, but at 40 billion there is a plenty of upside.
richardlblair 10y ago
A lot of good points in this thread. I do want to point out that the investment market is hot. That likely plays into their decision. Why wait when you know you can get a great valuation now, and there is a chance the market could cool.
nihonde 10y ago
I don't follow the numbers on Snap, but my personal experience is that Snow is eating their share in Asia. You can build a big business without Asia, but it won't be enough to keep The Street happy. This IPO feels like a liquidation for investors who see the end of the road ahead for Snap.
slackoverflower 10y ago
Many people here are underestimating Snapchat. It is the only app where I enjoy the ads. They are not intrusively at all, most of the time they show up at the end of a story or between 2 user's stories. They are all video ads which is the best form of getting attention (atleast for me) and interacting with the ad is as simple as swiping up on the video. If it is an app install ad: Swipe up and it brings up the App Store download view. If it's a shopping ad: swipe up and its bring a web view of the advertiser's ecommerce site. It is great! Facebook is boring and repetitive, Snapchat is lively and fun to use. I see it going extremely far but it will be tough to reach Facebook-scale.
beedogs 10y ago
Anyone who gets in on this IPO is going to know what pain feels like. How can a company that doesn't make any money go public in good faith?
tehwebguy 10y ago
If you have a chance to buy Spectacles go for it. They are super cool. Finally a way to snap while I'm grilling fried rice! Seriously, this solves a problem for me: https://youtu.be/0fdVJLB-TM0 https://youtu.be/0fdVJLB-TM0
ohstopitu 10y ago
A lot of people seem to question Snapchat's vision and profitability (even in this thread) especially with such a high evaluation. I thought I'd take a stab at it (all speculation based by current trends). So Snapchat needs to be broken down into 3 key components: 1. Users/Growth 2. Business 3. Tech So let's look into each... 1. Users/Growth: Snapchat is growing rapidly (~150 million active users[0]) and seems to know how to generate hype using various tactics (like the Spectacles for example...instead of just selling it, they appear at specific places at specific times, similar to timed filters and stories). Furthermore, they don't seem to mind experimenting - I had recently seen rumors floating around of Snapchat getting into the drone game too - based on some of their recently open positions). They seems to have gotten a tight grasp at the younger-ish market (14 - 30ish?) and either they'll continue to be hip and keep attracting that age group or they'll grow with their current userbase. Eitherway, the userbase is (very) loyal and hooked (~30 mins/day of usage [1]). 2. Business Based on 1, we know Snapchat is growing and it's got a loyal base, which means they are a great place to advertise. As of right now, it appears that only the "big" players have the access to advertise their content effectively - movie filters, stories etc. (and Snapchat seems to be making a lot of revenue from just this alone - ~ $350 million [0]). But from this subset, it can be seen that Snapchat is an effective medium for the current demographic (they are young, generally willing to spend and do or will grow up to have expendable income to spend). Smaller players (those who can't afford filters and stories) generally pay Snapchat celebrities to advertise to their large(-ish) user base but given Snapchat's intentions (for IPO), that could change pretty soon. To add to the above, Snapchat seems to be poised to move into the physical-virtual (augmented) ads space too, with geo filters. (Given their recent release of Spectacles, I'd say it'd be trivial to have something along the lines of Google Beacons/iBeacons - providing hyper local filters, discounts and so on. Furthermore, this can easily expand/integrate into a marketplace, providing even more revenue. 3. Tech If you have noticed, they have gotten their users to use AR (filters, geo-filters, Spectacles) without the "geekiness" involved that others currently involve. (yes, Hololens is still a lot geeky, pricer and a extra device than a iPhone) They appear have stumbled onto great ideas, but I have a feeling that it's highly calculated (I could be wrong) and they seem to have an idea / vision of what their future is or where they want to head. Current Competition (Subjective): Facebook seems to be intent on trying to capture the Snapchat market - most recently with Instagram Stories. In my opinion, Instagram Stories is not exactly similar but close enough. I feel like it'd not take off as much as Snapchat (but it does not have to) as much (I'd probably eat my words later), because it's easier to track users (I know this is what marketers are looking for, but from a user's perspective - It does not feel natural, feel a bit more judged and overall just like a nice facebook for photos. It's great if you want to grow a userbase and so on but you can do so on Snapchat too. My take: I feel that Snapchat for companies/marketers/users who are looking for more, require a change of perspective. Similar to how it took everyone to get used to the Internet, Social Media etc., it will take a while to get used to Snapchat. Furthermore, there is a lack of tooling around Snapchat which has made matters worse. That said, those who can grasp this and figure it out...they are in for a treat. Obviously, what I've written above is my take on Snapchat (both as a user and as a someone who loves technology). It's completely arm-chaired CEO talk but I'm interested in what people have to say/think about it. [0] https://techcrunch.com/2016/11/15/snapchat-has-reportedly-filed-confidentially-for-its-massive-ipo/ https://techcrunch.com/2016/11/15/snapchat-has-reportedly-fi... [1] http://www.businessinsider.com/how-much-time-people-spend-on-snapchat-2016-3 http://www.businessinsider.com/how-much-time-people-spend-on...
moron4hire 10y ago
I do not understand the value of Snapchat as a social network at all, and I use it on a daily basis. There's no way to reshare anything, which means the only way you can find people is through other channels external to Snapchat. And they make it really hard to add someone that isn't in your immediate vicinity with their logo ready to snap. This seems ludicrous to me. How can a social networking app not try to capture all of the activity surrounding it? How can a social networking app not do everything it can to encourage people to build their network?
millettjon 10y ago
Just an anecdote but my kids (2 10 year olds in Chile) use Instagram and Snapchat about the same. They use Whatsapp and Musically several times more frequently.
ankurdhama 10y ago
It is amazing that the best business model of current era is - Build something that allows people to feed their ego (ahem social activity ahem) and sell ads, simple :)
foota 10y ago
I use snapchat a lot to communicate and follow friends. I think their difficulty in monetization will be from not being able to target ads as effectively as Facebook or Google can.
ghostbunnies 10y ago
It's not so confidential anymore, is it?
irishcule 10y ago
When are people expecting this IPO to happen? Early 2017?
shaunrussell 10y ago
Anecdotal, but as a casual snapchat user I've noticed a significant 50%+ drop in activity by my friends + peers since Instagram launched stories. I use to sign in and have 20+ stories to watch, this morning it is 4. I feel like Snapchat sees the writing on the wall, and this is their chance for everyone to cash out.
SN76477 10y ago
I do not think closed systems have much of a future. They may be hot now, they are not going to last.

222 points by coloneltcb 10y ago

Tepix 10y ago

Could someone explain a) Why they need so much money? Don't tell me it's to produce some spectacles b) Why they are worth so much? I get that they have an interesting user base (young people), but they are having a hard time making money, aren't they? That $19b WhatsApp purchase hasn't exactly earned a lot of money yet, has it? It's still a very long bet, especially with Facebook being forbidden to collect the data now in some countries.

JonFish85 10y ago
a) Why they need so much money? "Need" is probably the wrong word. I imagine they're trying to maximize their return: sell enough stock to make lots of money, but not so much as to flood the market. b) Why they are worth so much? That's the question, and it really does boil down to "they're worth what people will pay". One side might argue that it's a game of musical chairs--someone assuming they can find a greater sucker to buy into it for more money down the road. Another side might be that they have a massive user base of people just starting to make money (high school & college graduates) who are willing to spend $5/mo on stickers and filters and stuff, as well as watch some ads. If they can effectively maintain their audience (a huge "if"), they will make lots of money. If they lose them to the next funny app, then they'll be a gigantic bust. So far they've continued to grow.... (Personally I think they're trying to IPO before the bottom falls out, but hey, what do I know)
sfaf 10y ago
a) To build an ad business capable of handling $100m of ads. You need massive investments in sales, infrastructure, tools, etc. to build a business like that b) They have one of the fastest growing user bases in the social space, their users spends an astounding amount of time on the app (estimated at 30 minutes per day), and their user base is the most targeted demographic for demographics. Also they have literally barely turned on the advertising machine and their initial forays have already hit a revenue run rate of $300M+. So essentially they have a shitload of eyeballs, the eyeballs are growing massively, their eyeballs spend a lot of time on their app, and advertisers love those eyeballs. Their business valuation is based on massive potential, not current revenues, but their advertising efforts already show huge promise. There is almost no startup with anything close to their engagement, growth, and monetization potential and the last company that looked like them was Facebook. Hence, the HYPE.
- BurningFrog 10y ago
  I wonder if the user base that rushes in so fast to Snapchat might not rush as quickly to the next cool app, whenever it pops up.
  - jandrese 10y ago
    Especially once it starts getting cluttered with annoying ads. Or when Mom and Dad discover it and try to move in.
    - nv-vn 10y ago
      The way Snapchat is designed is basically anti-Mom-and-Dad -- you get to choose who each message will go to specifically (like texts), and everything disappears after it's been sent or opened. For a parent trying to monitor their kids on Snapchat, there's really not that much you can do.
- MaxLeiter 10y ago
  As a teenager, it's almost constantly open on everyones phone - I wouldn't be surprised if I have it open/constantly checking it over 5 hours a day.
  - nv-vn 10y ago
    Agreed. As a relatively light user (relative to friends), I easily spend hours a day with the app open. It's easily the most popular app for people in the teenage demographic, and anyone who's spent any amount of time with teenagers will realize this.
- monkmartinez 10y ago
  To your point b... so it's all about bubbles? A race for eyeballs before they disappear to the next "new, cool" thing? Because advertising isn't working for the people that sell "things." If social networks are supposed to create spending/buying in retail (both online and meatspace) they are not doing a very good job. Google: Retail sales 2016.
binalpatel 10y ago
On a - I have no idea. On b- Not sure if it's worth $25 billion, but I have noticed that it is the "Facebook" for younger generations, and that when they use it, they use it all the time, not just a few times a day like other social media. It's a way to share their lives - in real time - with their friends and followers, and have their friends do the same. (Look at me sounding like an old man!)
- monkmartinez 10y ago
  That isn't "old man" that is practical thinking. Kids don't have any money!!!!!!!!!!
  - ethbro 10y ago
    But kids do have income increases and their highest years of earning ahead of them. That has to be worth something.
    - majormajor 10y ago
      How visible are AOL Instant Messenger ads to you these days? ;)
      - ethbro 10y ago
        Point. But I'm not going to discount the non-zero effect they likely still have on my reasoning for choosing certain brands when all else is equal.
      - gotrecruit 10y ago
        that's a fundamental misunderstanding of marketing. you probably subconsciously remember some of the ads, and even assimilated some of those messages into your psyche without realizing it. these probably manifest in ways like when you want to buy something and can't help but seem partial to a particular brand even though you're not sure why.
    - monkmartinez 10y ago
hkmurakami 10y ago
Re: WhatsApp. WhatsApp was a possible existential threat to FB (usage moving from streams of posts from many many "friends" to more direct conversation in smaller chat groups), so $19B when spread across the many years of "non-death" of the company can be recuperated even if they don't earn a dime from WhatsApp thereafter.
kevando 10y ago
I won't tell you to 'produce some spectacles' but Snapchat has been incredibly blunt about their goals. They claim to be reinventing the camera, and with AR, that probably means lots of R&D $. So probably not spectacles, but their next camera products.
pplperson 10y ago
a) also for r&d/acquire technology for AR/VR, we're just getting a taste of where they can go
- johngrefe 10y ago
  Need, as in, they couldn't capitalize enough for spectacles to be on store shelves for xmas. Obviously, something is very wrong.
pfarnsworth 10y ago
"Need" money? You mean "want" money, right? And there's no wrong reason to want money since this is the US. Maybe he'll turn into a huge benefactor like Bill Gates and return all that money back to charitable foundations, etc.
banusaur 10y ago
A) They have the capacity to deliver state-of-the-art technology and can easily dominate with a surge of money for mass-production of electronics. On a whim they could deliver unparalleled face recognition for instance: https://hackernoon.com/is-snap-inc-building-a-wearable-face-recognition-device-for-the-nsa-94bc12aef06e#.pl3za65d3 https://hackernoon.com/is-snap-inc-building-a-wearable-face-... B) They're worth so much because on any given day, the app reaches 41 percent of all 18-to-34-year-olds in the United States. They have amazing potential as a platform for advertising, recruiting, sales, and so much more. They're probably not making money yet because they're not done honey-potting everybody like Facebook circa-2008. You may be right about a bloated WhatsApp $19B price, because the Snapchat data is much more valuable and going for $4B.
- duaneb 10y ago
  Is there any indication they can monetize their audience? Twitter claimed to. How is snapchat different?
  - banusaur 10y ago
    They have the ability to monetize unexplored territory like face recognition and AR in real, meaningful ways. They've built an amazing technical team and are in position to execute on ideas that could have an incredible impact on the way humans interact in real life. They are among a few tech companies whose tech could cause a cultural paradigm shift akin to what we saw with the introduction of the smartphone. This should be an exciting couple of years.
    - duaneb 10y ago
      While I agree they are working on cool things, this is entirely separate from an ability to monetize it. This is the part I doubt; I don't see anything that indicates they would succeed where twitter failed.
      - nv-vn 10y ago
        AR filters are huge on the app. Being able to use them as advertisements has already proven successful.

chollida1 10y ago

Really interested in learning if Snap is more Facebook or Twitter. This could be a big litmus test for the tech IPO. 2 things I'm very interested in: 1) If the rumors are correct that they are looking to raise 4 Billion at a roughly $40 Billion valuation. If you assume that their absolute pie in the sky max valuation ever is similar to what facebook is now, roughly 340 Billion, then that's not alot of upside for investors for a company that probably isn't yet profitable. 2) I've heard that the founders have locked up voting control. I'm always half watching companies like this to find out just how far they can push wall street before wall street says no more. Mark Zuckerberg and the Google founders have done a great job of managing their companies while maintaining voter control. I want to see a tech company where the founders own voting control but manage the company like Twitter, this is not a positive reference. If Snap get's their rumored IPO price but can't grow revenue then they could be the poster child for SEC minority shareholder reform, but then again President Trump has said he wants to remove regulation in the markets so..... Twitter had a very dedicated and professional audience, journalists, investors, etc who used their product and they couldn't live up to expectations. Snap now has to better than twitter and they'll have to do it by taking advertising dollars from Google and Facebook. That's a tough fight to get into.

serge2k 10y ago
> the Google founders have done a great job of managing their companies while maintaining voter control. They moved aside and let Schmidt be CEO for a while though, because Page was not ready.
tenpies 10y ago
I wish we could get some visibility as to how many Snapchat users are adult content creators. This is a segment that everyone seems to ignore, but I think we would be surprised to learn its scale and the amount of money flowing through it. It's also probably the group of users which most use Snapcash and driver huge numbers across all metrics.
- Jordrok 10y ago
  I would be very interested to know this too, but of course it's all technically against the ToS[1] and so I doubt Snapchat will ever even acknowledge it, much less give numbers on it. Don't want to offend those delicate advertisers! [1] http://www.dailydot.com/debug/snapchat-porn-banned/ http://www.dailydot.com/debug/snapchat-porn-banned/ (The article is over a year old, but not much has changed since then.)

pplperson 10y ago

Maybe someone can enlighten me. I read awhile back (when the rumors just started) that a company can not engage in advertising/marketing in the pre-IPO period. If that's the case I assume the timing of Spectacles release is a way around that?

rpedela 10y ago
Do you mean any and all advertising or advertising for the IPO specifically?
carlosdp 10y ago
They cannot make large product announcements or changes in the "quiet period" between when the IPO is publically filed and when it goes live. This is a rumor of a private filing, not the public filing, so yes Spectacles are well in the clear. You can make large announcements right up till the day the IPO is published on the SEC website. This is because you are not supposed to solicit people to buy your shares before it goes public.

taytus 10y ago

I'm a professional photographer with about 16K + Instagram followers. I used snapchat to stream behind the scenes photos and videos and retouching tutorials, but that was a black box. Yes, I had comments open and I interacted with my friends and fans, but I couldn't tag anyone, or hashtags, discoverability is a serious issues in that platform. I started using Instagram stories and now I have the same views per snaps that I had on snapchat plus now I can tag brands/models/makeup artists/ etc. Instagram is going to EAT snapchat, specially for content creators discoverability is everything.

ardeay 10y ago
I don't think that is snapchats appeal
kevando 10y ago
MAGNIFICENT analysis.
- taytus 10y ago
  I'm fully aware this is anecdata. But I can tell you I'm not alone on this. I just shared my experience. Sorry.
  - ProAm 10y ago
    People dont want to be tagged on snapchat, their audience likes exactly the opposite.
    - taytus 10y ago
      You are right. The point I'm trying to make is that brands (and some people) wants the opposite. It would be perfect if at least we had some option to allow tagging or something like a business account. On instagram stories now you even can have a link to an external page!
      - 10y ago

kevando 10y ago

Maybe I'm alone here, but I love the way Evan and Snapchat, er Snap, communicate as a company. They are incredibly tight lipped, but also very honest and blunt. They've talked about this IPO for years, and made no secret about becoming a camera company.

pimlottc 10y ago
On the other hand, I find it extremely annoying how Team Snapchat routinely sends elaborately animated pre-prepared snaps that are impossible to make in the official app. Eat your own dogfood, guys!
- pritianka 10y ago
  I agree with you on this one. It feels unfair!
- kevando 10y ago
  Interesting.
WheelsAtLarge 10y ago
I agree. Tight lips with "information leaks", makes for an intriguing situation. Apple is the master at this. They never announce anything but the media's love to search for information(mostly useless, if not leaked by the company's communication's dept) gives then a ton of constant publicity - very smart.
partiallypro 10y ago
If they really plan to be a camera company then this stock will be the next Twitter, but possibly worse.
photogrammetry 10y ago
You might love it, but the rest of us really don't.

WheelsAtLarge 10y ago

Can some one tell me why they use "confidentially"? When they have been talking about this for months and everyone in the tech/social business knows about it. I guess it's confidential since they didn't blast fireworks and cannons. Anyhow, I say that they will soon(if not now) be known as the cool social network while Facebook will live as the old but reliable techie social network , similar to the Apple/Microsoft delineation.

lesdeuxmagots 10y ago
Its a type of filing. Confidentially means that we cannot go so EDGAR and look up the filing right now, and they will not need to disclose the documents publicly until very close to the actual IPO. This is a relatively new type of filing that was introduced in the JOBS act, designed to encourage emerging businesses to go public. You can read about the specifics here: https://www.sec.gov/divisions/corpfin/guidance/cfjumpstartfaq.htm https://www.sec.gov/divisions/corpfin/guidance/cfjumpstartfa... Normally, if the company does not qualify for confidential filing, we would be able to go and see the draft S-1 on EDGAR 6 - 9 months in advance of the actual IPO.
- WheelsAtLarge 10y ago
  Thanks, very informative.
jonnyy 10y ago
It reflects a change in IPO filing law. Quoting Wikipedia: "Under the JOBS Act, it has been possible since April 2012 for "emerging growth companies" to file a Form S-1 on a confidential basis, only making the contents public 21 days prior to the road show for the IPO." With many IPO filings, the financial docs are immediately available to review. Because Snap filed confidentially, we are not given access to these docs until shortly before the actual sale of the IPO shares.

johngrefe 10y ago

So people are super hyped about the Snapchat Spectacles. I get the excitement, they are Google Glass at a proletariat price, so owning them doesn't make you a GlassHole. Snapchat is one of the most popular LA Unicorns. Everyone is waiting for them to go public. So how did they release their big hardware add on? Limited time vending machines. They are spinning it as cool, but with XMas, their supposed capitalization and user base, it's a pretty big warning that these are not released through a consumer channel. They are probably experiencing major headwinds keeping them out of commercialization, or a major cash crisis. I'm want to side with the cash crisis. I'd love to be proven wrong, but I don't think their balance sheet is going to be very strong, if the fundamentals were there, Amazon and Best Buy would be distributing the product. Sure, tell me its a marketing strategy for exclusivity, I agree, it's great. It should have been done over the summer, moving into store shelves last week for Xmas sales.

deepnotderp 10y ago
My personal hypothesis on this is that they're eating a loss at the price range right now and are trying to figure out if people are interested in the spectacles and at what price.
- johngrefe 10y ago
  I've scanned through twitter, they have users driving hours to try to buy them. I'm confident people are super excited. Being in the consumer electronics space myself, it takes about 80% of expected sales as capital to get anything into commercialization. This is just throwing huge flags for me as an investor.
- huac 10y ago
  They'll probably create different models for different price points. Capturing the teen market is more important than the tech yuppie market, but if you can gouge a willing audience, you probably should.
- usrusr 10y ago
  If anything they are creating a whole lot of media buzz, likely to be perfectly timed ahead of their IPO. The message isn't "we have head mounted cameras, head mounted cameras will dominate the world", the message is "we are more than just another entry in the endless stream of icq successors, continue to expect the unexpected". This might turn out to be more valuable to founders and VCs than the total hardware cost of the first few batches of camera sunglasses. For that function, the final spectacles price could be purely a balancing act between looking financially responsible to future investors and not deterring consumers to much, with no relation to hardware cost at all.

manishsharan 10y ago

Yet another platform to tickle our narcissism and voyeurism. The fact that this kind of innovation is so lucrative make me despair. And also, get off my lawn !!

Apocryphon 10y ago
At least you can't create news filter bubbles or troll with Snapchat.
- st3v3r 10y ago
  Maybe that's why it's so popular. Most people are fed up with trolling.

Apocryphon 10y ago

To anyone on HN (or elsewhere) who doesn't get Snapchat, revisit Justin Kan's explanation: https://news.ycombinator.com/item?id=10859860 https://news.ycombinator.com/item?id=10859860

patorjk 10y ago
Looks like the blog post linked in that thread now gives a 404.
- __derek__ 10y ago
  Here's the correct URL: https://justinkan.com/why-i-love-snapchat-23d31ea87d3c https://justinkan.com/why-i-love-snapchat-23d31ea87d3c

brilliantcode 10y ago

> $250 million and $350 million this year, according to those documents. That's pretty impressive but is it a sustainable source of income? Seems like this socio-consumer space is extremely volatile. Facebook & Twitter was the last platform I interacted with....3 years ago. Haven't even used instgram, vine, now snap chat. The fact that billions of dollars were spent buying out instagram, whatsapp, I wonder how facebook is aiming to make back all that cash expenditure. Linkedin barely gets a pass because it's enterprisey and Microsoft validated by buying it out. Take my view with a grain of salt as I consider these social networking type of websites our generation's "cigarette" -everyone is doing it and nobody wants to stop and examine it's impact on the quality of your life. I guess when everybody is around me is so concerned with the avatar version of themselves online and how they think they are perceived, therein emerges a divergence of values and attitude towards such mediums and the type of personalities it generates that leaks into real life (which I steer away from).

samfisher83 10y ago

I realized that facebook had made it when old people started using it, and I don't mean silicon valley old, but like for real old. Snapchat hasn't hit that threshold yet. It could be the next myspace of facebook, but at 40 billion there is a plenty of upside.

richardlblair 10y ago

A lot of good points in this thread. I do want to point out that the investment market is hot. That likely plays into their decision. Why wait when you know you can get a great valuation now, and there is a chance the market could cool.

nihonde 10y ago

I don't follow the numbers on Snap, but my personal experience is that Snow is eating their share in Asia. You can build a big business without Asia, but it won't be enough to keep The Street happy. This IPO feels like a liquidation for investors who see the end of the road ahead for Snap.

slackoverflower 10y ago

Many people here are underestimating Snapchat. It is the only app where I enjoy the ads. They are not intrusively at all, most of the time they show up at the end of a story or between 2 user's stories. They are all video ads which is the best form of getting attention (atleast for me) and interacting with the ad is as simple as swiping up on the video. If it is an app install ad: Swipe up and it brings up the App Store download view. If it's a shopping ad: swipe up and its bring a web view of the advertiser's ecommerce site. It is great! Facebook is boring and repetitive, Snapchat is lively and fun to use. I see it going extremely far but it will be tough to reach Facebook-scale.

beedogs 10y ago

Anyone who gets in on this IPO is going to know what pain feels like. How can a company that doesn't make any money go public in good faith?

tehwebguy 10y ago

If you have a chance to buy Spectacles go for it. They are super cool. Finally a way to snap while I'm grilling fried rice! Seriously, this solves a problem for me: https://youtu.be/0fdVJLB-TM0 https://youtu.be/0fdVJLB-TM0

ohstopitu 10y ago

A lot of people seem to question Snapchat's vision and profitability (even in this thread) especially with such a high evaluation. I thought I'd take a stab at it (all speculation based by current trends). So Snapchat needs to be broken down into 3 key components: 1. Users/Growth 2. Business 3. Tech So let's look into each... 1. Users/Growth: Snapchat is growing rapidly (~150 million active users[0]) and seems to know how to generate hype using various tactics (like the Spectacles for example...instead of just selling it, they appear at specific places at specific times, similar to timed filters and stories). Furthermore, they don't seem to mind experimenting - I had recently seen rumors floating around of Snapchat getting into the drone game too - based on some of their recently open positions). They seems to have gotten a tight grasp at the younger-ish market (14 - 30ish?) and either they'll continue to be hip and keep attracting that age group or they'll grow with their current userbase. Eitherway, the userbase is (very) loyal and hooked (~30 mins/day of usage [1]). 2. Business Based on 1, we know Snapchat is growing and it's got a loyal base, which means they are a great place to advertise. As of right now, it appears that only the "big" players have the access to advertise their content effectively - movie filters, stories etc. (and Snapchat seems to be making a lot of revenue from just this alone - ~ $350 million [0]). But from this subset, it can be seen that Snapchat is an effective medium for the current demographic (they are young, generally willing to spend and do or will grow up to have expendable income to spend). Smaller players (those who can't afford filters and stories) generally pay Snapchat celebrities to advertise to their large(-ish) user base but given Snapchat's intentions (for IPO), that could change pretty soon. To add to the above, Snapchat seems to be poised to move into the physical-virtual (augmented) ads space too, with geo filters. (Given their recent release of Spectacles, I'd say it'd be trivial to have something along the lines of Google Beacons/iBeacons - providing hyper local filters, discounts and so on. Furthermore, this can easily expand/integrate into a marketplace, providing even more revenue. 3. Tech If you have noticed, they have gotten their users to use AR (filters, geo-filters, Spectacles) without the "geekiness" involved that others currently involve. (yes, Hololens is still a lot geeky, pricer and a extra device than a iPhone) They appear have stumbled onto great ideas, but I have a feeling that it's highly calculated (I could be wrong) and they seem to have an idea / vision of what their future is or where they want to head. Current Competition (Subjective): Facebook seems to be intent on trying to capture the Snapchat market - most recently with Instagram Stories. In my opinion, Instagram Stories is not exactly similar but close enough. I feel like it'd not take off as much as Snapchat (but it does not have to) as much (I'd probably eat my words later), because it's easier to track users (I know this is what marketers are looking for, but from a user's perspective - It does not feel natural, feel a bit more judged and overall just like a nice facebook for photos. It's great if you want to grow a userbase and so on but you can do so on Snapchat too. My take: I feel that Snapchat for companies/marketers/users who are looking for more, require a change of perspective. Similar to how it took everyone to get used to the Internet, Social Media etc., it will take a while to get used to Snapchat. Furthermore, there is a lack of tooling around Snapchat which has made matters worse. That said, those who can grasp this and figure it out...they are in for a treat. Obviously, what I've written above is my take on Snapchat (both as a user and as a someone who loves technology). It's completely arm-chaired CEO talk but I'm interested in what people have to say/think about it. [0] https://techcrunch.com/2016/11/15/snapchat-has-reportedly-filed-confidentially-for-its-massive-ipo/ https://techcrunch.com/2016/11/15/snapchat-has-reportedly-fi... [1] http://www.businessinsider.com/how-much-time-people-spend-on-snapchat-2016-3 http://www.businessinsider.com/how-much-time-people-spend-on...

moron4hire 10y ago

I do not understand the value of Snapchat as a social network at all, and I use it on a daily basis. There's no way to reshare anything, which means the only way you can find people is through other channels external to Snapchat. And they make it really hard to add someone that isn't in your immediate vicinity with their logo ready to snap. This seems ludicrous to me. How can a social networking app not try to capture all of the activity surrounding it? How can a social networking app not do everything it can to encourage people to build their network?

millettjon 10y ago

Just an anecdote but my kids (2 10 year olds in Chile) use Instagram and Snapchat about the same. They use Whatsapp and Musically several times more frequently.

ankurdhama 10y ago

It is amazing that the best business model of current era is - Build something that allows people to feed their ego (ahem social activity ahem) and sell ads, simple :)

foota 10y ago

I use snapchat a lot to communicate and follow friends. I think their difficulty in monetization will be from not being able to target ads as effectively as Facebook or Google can.

ghostbunnies 10y ago

It's not so confidential anymore, is it?

irishcule 10y ago

When are people expecting this IPO to happen? Early 2017?

shaunrussell 10y ago

Anecdotal, but as a casual snapchat user I've noticed a significant 50%+ drop in activity by my friends + peers since Instagram launched stories. I use to sign in and have 20+ stories to watch, this morning it is 4. I feel like Snapchat sees the writing on the wall, and this is their chance for everyone to cash out.

SN76477 10y ago

I do not think closed systems have much of a future. They may be hot now, they are not going to last.