9 ms·

Estimated losses would make Snapchat the most unprofitable social media IPO

85 points by ryougazilla 10y ago

FT_intern 10y ago
for employees, it'll be because backloaded RSUs
imaginenore 10y ago
The $1.05B revenue for 2017 figure is completely made up. But even if you assume it's real, the $25B valuation still makes zero sense. 25 times the annual revenue, not the profit.
- GordonS 10y ago
  Even more so when you consider the chances of Snapchat still being a thing in 3 years, let alone 25
  - argonaut 10y ago
    Three years ago, in college Snapchat was hugely popular. Three years later, today, it is still hugely popular. Of course, if you only heard about it on HN/tech sites, you might think Snapchat is a recently popular phenomenon.
    - kedean 10y ago
      Yeah, it's only been getting more and more popular as people realize it actually fills a real communications niche, and isn't just for sending dirty pictures.
- samfisher83 10y ago
  People made the same argument when FB turned down Yahoo 2billion dollar bid. This kind of stuff is too hard to predict. It is a very risky play, but its all based on projected growth and what you feel it is.
- jpatokal 10y ago
  Not sure why the above is getting downvoted, since the revenue number in the article is literally made up! ...it is possible to crank out a rudimentary model given reasonable assumptions. We were surprised that no one seems to have done this yet and so cranked one out just to see what happens. ... we arrived at the $1bn revenue target for 2016 Here's the spreadsheet they used: https://sentieo.com/wp-content/uploads/snap-model-1.xlsx https://sentieo.com/wp-content/uploads/snap-model-1.xlsx Google Docs copy for your convenience: https://docs.google.com/spreadsheets/d/1HGmor-k953dlAUvMJUvgHSnIQhaaU9_0U-hFAGb8j4o/edit?usp=sharing https://docs.google.com/spreadsheets/d/1HGmor-k953dlAUvMJUvg... Basically, plug random numbers into the blue figures and watch the rest dance around.
CodeSheikh 10y ago
When you use Snapchat you will notice that most of the top "news" publishers are the sort of Daily Mail and other tabloids infested with celebrities and kardashians bogus stories. It does not allow you to curate newsfeed per your taste. The publishers I want to read/watch/follow are not on Snapchat or I can't pick and create my selection. Unlike Facebook, where my wall is full with informational posts catered towards me, by me. This can tell you a lot about who is paying for advertisements on Snapchat and what type of audience they are catering to with what kind of content. It reeks desperation. Edit 1: Grammar
- hbosch 10y ago
  I often find it nearly embarrassing to check my "Stories" section on the bus, because right there at the top is some sort of sensational headline with an out-of-context, usually quite risqué photo. In the recent past, the first few tiles would show some Kardashian sister in a wet shirt, bathing suit, or less. Just a couple days ago, I want to say, was a revolting picture of just two large tongues lashing one another... One of the best parts about my jailbroken iPhone 6 was that I could tweak Snapchat to hide those (along with the "Featured" Stories below, today in which is a whole communal story dedicated to eating pasta).
  - pryelluw 10y ago
    Thats because they are trying way too hard to be edgy and "young". Like MTV these days.
  - CodeSheikh 10y ago
    How did you tweak your Snapchat? Spare me Google research.
    - hbosch 10y ago
      On iOS it was Snap++ or Phantom. Both tweaks can hide your Snapchat ads. Requires an iPhone running iOS < version 10.
  - rhizome 10y ago
danso 10y ago
Since Facebook's IPO, which tech unicorns still feel bullish? Here are the tech IPOs I can think off the top of my head. Maybe it's selection bias (I only remember the ones that don't look healthy), but this is what I thought of, and they all are not doing well compared to their IPO price, or were on a heavy downward trend: - Box http://finance.yahoo.com/quote/BOX?ltr=1 http://finance.yahoo.com/quote/BOX?ltr=1 - Pandora http://finance.yahoo.com/quote/P http://finance.yahoo.com/quote/P - Twitter http://finance.yahoo.com/quote/TWTR http://finance.yahoo.com/quote/TWTR - Tableau http://finance.yahoo.com/quote/DATA http://finance.yahoo.com/quote/DATA - Groupon http://finance.yahoo.com/quote/GRPN http://finance.yahoo.com/quote/GRPN - Twilio http://finance.yahoo.com/quote/TWLO http://finance.yahoo.com/quote/TWLO (too short of time to tell, but including it here anyway) LinkedIn had fallen far from its high until Microsoft bought it: http://finance.yahoo.com/quote/LNKD http://finance.yahoo.com/quote/LNKD King (Candy Crush, etc.) was bought by Blizzard but even with the premium it sold at, it was still about 25% off its IPO: http://fortune.com/2015/11/03/activision-blizzard-king-digital/ http://fortune.com/2015/11/03/activision-blizzard-king-digit... Of course there have been other unicorns, less sexy media (including non-American) darlings that might be doing just fine. And of course Facebook still looks strong, but FB always seemed like it would do string, at least out of all the other social networks. I admit that I'm not much of a Snapchat user, even though many of my friends have migrated over. But does it really have the same potential as FB to integrate itself into all areas of digital life? Even if SNAP has strong underlying numbers, it'd be an outlier if it remained strong 3-5 years from now. On a sidenote, would love to see an update to this NYT interactive at the time of Facebook's IPO: http://www.nytimes.com/interactive/2012/05/17/business/dealbook/how-the-facebook-offering-compares.html http://www.nytimes.com/interactive/2012/05/17/business/dealb... edit: added KING (Candy Crush makers)
- maneesh 10y ago
  SHOP (Shopify) is doing pretty well and their upcoming plans/platform seem to bode well for them.
  - automatwon 10y ago
    I didn't even know Shopify was in the unicorn category. I previously worked on a project that generated coupon codes programmatically for a Spotify shop. I just closed my testing account a couple days ago, and thought to myself 'wow, Shopify is still a thing'. No offense, I'm a programmer so I'm completely ignorant to the value I guess.
kevinpet 10y ago
This is a lot of analysis to hang on leaked 2014 numbers. It's a rapidly growing and changing company.
- samnwa 10y ago
  But also a company that shares very little. Snapchat's positioning has always felt relatively scammy to me. Look forward to some amount of transparency around traditional metrics either as a result of this suit or through the IPO process.
  - supernovae 10y ago
    Snapchat would be a better company if it wasn't ran by a complete a-hole who refuses to support anything but iOS.. Facebook will eat their lunch if they don't go cross platform.
Analemma_ 10y ago
HN's algorithm has a sense of humor: this pairs nicely with the other front-page story about the 2014 prediction that Facebook would be dead by 2017.
- lowglow 10y ago
  Facebook does feel like it is dying though. 1. A lot of my friends are leaving facebook 2. A lot of my dev friends no longer build on facebook's platform 3. Most of the young kids I know have moved to Snapchat. 4. Most of the older kids I know hang out on Instagram. 5. All the friends that worked at facebook have left to go work elsewhere.
  - sna1l 10y ago
    While true, this is anecdotal data. Are their overall engagement numbers down that much?
    - monkmartinez 10y ago
      The problem is those numbers are easily faked|manipulated. I agree with OP in the same way that I believe the story about the shoe shine boy and the stock market. It may not happen tomorrow, but facebook is not cool anymore.
      - saycheese 10y ago
        Just to be clear, are you saying it is easy to "fake" Facebook's numbers below, and if so, how? Revenue - 7.01B (up 59% YoY) Net Income - 1.38B (up 166% YoY)
        ebbv 10y ago
        They can choose to count those in various ways. See the stories about Facebook exaggerating video engagement. Additionally Facebook has gladly allowed obviously fake and spammy accounts on the site for ages. Note also that nobody is claiming Facebook is a ghost town. Clearly a lot of people still use it. But it's not remotely cool any more. Most people I know who still have accounts think of it as a burden.
Xyik 10y ago
i find it hard to believe that it could do worse than Twitter.
- szul 10y ago
  Maybe I'm just old, but I never got the appeal. I find it hard to believe Snapchat has more social value than Twitter, but that's just my opinion.
  - hyperbovine 10y ago
    I must be older still -- I can't believe any of it has value.
    - rhizome 10y ago
      Twitter handles 80% of my news consumption somewhat like a "conversational RSS feed." I follow reporters and opinionators I respect and read the links they post to stories.
- angryasian 10y ago
  sorry for repeating myself, but I think they will have a much harder time and will do worse than twitter. At least with twitter you can identify an interest graph. Snapchat is similar in a sense but monetizing stories is a tough sell, because there is no real contextual information on what your friends are actually creating stories about. I just don't see people following brands on snapchat like they do on twitter. Snaps filters I will say are effective, but just how effective we'll see. Snapchat's entire premise is based on ephemerality so even if someone were to advertise or brand, it goes away and is done. You can rewatch stories but even that is limited. Like twitter I don't see this product crossing over to a more general use of the population like facebook. Even expansion overseas will be hard because there are already major messaging platforms that have a strong foothold. Line, whatsapp, Snow ( snapchat clone), wechat and kikao. I also can't see them really expanding beyond the US.
  - pathy 10y ago
stevesun21 10y ago
When social media get started loading fun part, then, they should think how to convert into a tool people can use within their daily social activities – increase user coupling grade.
throw2016 10y ago
This could as easily have been titled why X will be the most profitable social media IPO ever. It reads more like someone is hoping for them to fail and is grasping for reason to justify this unpleasant emotion. Snapchat established itself in a challenging marketplace dominated by large, successful and well funded companies. Something Google inspite of all its engineering prowess, financial resources and influence has failed repeatedly to do. They have not even come close. Let's give the founder some credit for gaining a large and engaged userbase. Its a huge achievement in any context and given competitors are making money there is no reason think Snapchat can't.
tedsanders 10y ago
IPOs don't really generate profit for companies. They allow one group of people to trade equity for cash and a second group of people to make the exact opposite trade. On net, society is left with exactly the same amount of equity and cash. If the IPO jumps, it means the sellers lose while the buyers win. If the IPO falls, it means the sellers win while the buyers lose. In either case, it's pretty much distributional and zero-sum. I don't understand why this headline is newsworthy. Profit is not the purpose of IPOs. (To be clear: IPOs do have purpose. They generate cashflow. And they diversify/broaden the investor pool.)

85 points by ryougazilla 10y ago

for employees, it'll be because backloaded RSUs

The $1.05B revenue for 2017 figure is completely made up. But even if you assume it's real, the $25B valuation still makes zero sense. 25 times the annual revenue, not the profit.

GordonS 10y ago
Even more so when you consider the chances of Snapchat still being a thing in 3 years, let alone 25
- argonaut 10y ago
  Three years ago, in college Snapchat was hugely popular. Three years later, today, it is still hugely popular. Of course, if you only heard about it on HN/tech sites, you might think Snapchat is a recently popular phenomenon.
  - kedean 10y ago
    Yeah, it's only been getting more and more popular as people realize it actually fills a real communications niche, and isn't just for sending dirty pictures.
samfisher83 10y ago
People made the same argument when FB turned down Yahoo 2billion dollar bid. This kind of stuff is too hard to predict. It is a very risky play, but its all based on projected growth and what you feel it is.
jpatokal 10y ago
Not sure why the above is getting downvoted, since the revenue number in the article is literally made up! ...it is possible to crank out a rudimentary model given reasonable assumptions. We were surprised that no one seems to have done this yet and so cranked one out just to see what happens. ... we arrived at the $1bn revenue target for 2016 Here's the spreadsheet they used: https://sentieo.com/wp-content/uploads/snap-model-1.xlsx https://sentieo.com/wp-content/uploads/snap-model-1.xlsx Google Docs copy for your convenience: https://docs.google.com/spreadsheets/d/1HGmor-k953dlAUvMJUvgHSnIQhaaU9_0U-hFAGb8j4o/edit?usp=sharing https://docs.google.com/spreadsheets/d/1HGmor-k953dlAUvMJUvg... Basically, plug random numbers into the blue figures and watch the rest dance around.

CodeSheikh 10y ago

When you use Snapchat you will notice that most of the top "news" publishers are the sort of Daily Mail and other tabloids infested with celebrities and kardashians bogus stories. It does not allow you to curate newsfeed per your taste. The publishers I want to read/watch/follow are not on Snapchat or I can't pick and create my selection. Unlike Facebook, where my wall is full with informational posts catered towards me, by me. This can tell you a lot about who is paying for advertisements on Snapchat and what type of audience they are catering to with what kind of content. It reeks desperation. Edit 1: Grammar

hbosch 10y ago
I often find it nearly embarrassing to check my "Stories" section on the bus, because right there at the top is some sort of sensational headline with an out-of-context, usually quite risqué photo. In the recent past, the first few tiles would show some Kardashian sister in a wet shirt, bathing suit, or less. Just a couple days ago, I want to say, was a revolting picture of just two large tongues lashing one another... One of the best parts about my jailbroken iPhone 6 was that I could tweak Snapchat to hide those (along with the "Featured" Stories below, today in which is a whole communal story dedicated to eating pasta).
- pryelluw 10y ago
  Thats because they are trying way too hard to be edgy and "young". Like MTV these days.
- CodeSheikh 10y ago
  How did you tweak your Snapchat? Spare me Google research.
  - hbosch 10y ago
    On iOS it was Snap++ or Phantom. Both tweaks can hide your Snapchat ads. Requires an iPhone running iOS < version 10.
- rhizome 10y ago

danso 10y ago

Since Facebook's IPO, which tech unicorns still feel bullish? Here are the tech IPOs I can think off the top of my head. Maybe it's selection bias (I only remember the ones that don't look healthy), but this is what I thought of, and they all are not doing well compared to their IPO price, or were on a heavy downward trend: - Box http://finance.yahoo.com/quote/BOX?ltr=1 http://finance.yahoo.com/quote/BOX?ltr=1 - Pandora http://finance.yahoo.com/quote/P http://finance.yahoo.com/quote/P - Twitter http://finance.yahoo.com/quote/TWTR http://finance.yahoo.com/quote/TWTR - Tableau http://finance.yahoo.com/quote/DATA http://finance.yahoo.com/quote/DATA - Groupon http://finance.yahoo.com/quote/GRPN http://finance.yahoo.com/quote/GRPN - Twilio http://finance.yahoo.com/quote/TWLO http://finance.yahoo.com/quote/TWLO (too short of time to tell, but including it here anyway) LinkedIn had fallen far from its high until Microsoft bought it: http://finance.yahoo.com/quote/LNKD http://finance.yahoo.com/quote/LNKD King (Candy Crush, etc.) was bought by Blizzard but even with the premium it sold at, it was still about 25% off its IPO: http://fortune.com/2015/11/03/activision-blizzard-king-digital/ http://fortune.com/2015/11/03/activision-blizzard-king-digit... Of course there have been other unicorns, less sexy media (including non-American) darlings that might be doing just fine. And of course Facebook still looks strong, but FB always seemed like it would do string, at least out of all the other social networks. I admit that I'm not much of a Snapchat user, even though many of my friends have migrated over. But does it really have the same potential as FB to integrate itself into all areas of digital life? Even if SNAP has strong underlying numbers, it'd be an outlier if it remained strong 3-5 years from now. On a sidenote, would love to see an update to this NYT interactive at the time of Facebook's IPO: http://www.nytimes.com/interactive/2012/05/17/business/dealbook/how-the-facebook-offering-compares.html http://www.nytimes.com/interactive/2012/05/17/business/dealb... edit: added KING (Candy Crush makers)

maneesh 10y ago
SHOP (Shopify) is doing pretty well and their upcoming plans/platform seem to bode well for them.
- automatwon 10y ago
  I didn't even know Shopify was in the unicorn category. I previously worked on a project that generated coupon codes programmatically for a Spotify shop. I just closed my testing account a couple days ago, and thought to myself 'wow, Shopify is still a thing'. No offense, I'm a programmer so I'm completely ignorant to the value I guess.

kevinpet 10y ago

This is a lot of analysis to hang on leaked 2014 numbers. It's a rapidly growing and changing company.

samnwa 10y ago
But also a company that shares very little. Snapchat's positioning has always felt relatively scammy to me. Look forward to some amount of transparency around traditional metrics either as a result of this suit or through the IPO process.
- supernovae 10y ago
  Snapchat would be a better company if it wasn't ran by a complete a-hole who refuses to support anything but iOS.. Facebook will eat their lunch if they don't go cross platform.

Analemma_ 10y ago

HN's algorithm has a sense of humor: this pairs nicely with the other front-page story about the 2014 prediction that Facebook would be dead by 2017.

lowglow 10y ago
Facebook does feel like it is dying though. 1. A lot of my friends are leaving facebook 2. A lot of my dev friends no longer build on facebook's platform 3. Most of the young kids I know have moved to Snapchat. 4. Most of the older kids I know hang out on Instagram. 5. All the friends that worked at facebook have left to go work elsewhere.
- sna1l 10y ago
  While true, this is anecdotal data. Are their overall engagement numbers down that much?
  - monkmartinez 10y ago
    The problem is those numbers are easily faked|manipulated. I agree with OP in the same way that I believe the story about the shoe shine boy and the stock market. It may not happen tomorrow, but facebook is not cool anymore.
    - saycheese 10y ago
      Just to be clear, are you saying it is easy to "fake" Facebook's numbers below, and if so, how? Revenue - 7.01B (up 59% YoY) Net Income - 1.38B (up 166% YoY)
      - ebbv 10y ago
        They can choose to count those in various ways. See the stories about Facebook exaggerating video engagement. Additionally Facebook has gladly allowed obviously fake and spammy accounts on the site for ages. Note also that nobody is claiming Facebook is a ghost town. Clearly a lot of people still use it. But it's not remotely cool any more. Most people I know who still have accounts think of it as a burden.

Xyik 10y ago

i find it hard to believe that it could do worse than Twitter.

szul 10y ago
Maybe I'm just old, but I never got the appeal. I find it hard to believe Snapchat has more social value than Twitter, but that's just my opinion.
- hyperbovine 10y ago
  I must be older still -- I can't believe any of it has value.
  - rhizome 10y ago
    Twitter handles 80% of my news consumption somewhat like a "conversational RSS feed." I follow reporters and opinionators I respect and read the links they post to stories.
angryasian 10y ago
sorry for repeating myself, but I think they will have a much harder time and will do worse than twitter. At least with twitter you can identify an interest graph. Snapchat is similar in a sense but monetizing stories is a tough sell, because there is no real contextual information on what your friends are actually creating stories about. I just don't see people following brands on snapchat like they do on twitter. Snaps filters I will say are effective, but just how effective we'll see. Snapchat's entire premise is based on ephemerality so even if someone were to advertise or brand, it goes away and is done. You can rewatch stories but even that is limited. Like twitter I don't see this product crossing over to a more general use of the population like facebook. Even expansion overseas will be hard because there are already major messaging platforms that have a strong foothold. Line, whatsapp, Snow ( snapchat clone), wechat and kikao. I also can't see them really expanding beyond the US.
- pathy 10y ago

stevesun21 10y ago

When social media get started loading fun part, then, they should think how to convert into a tool people can use within their daily social activities – increase user coupling grade.

throw2016 10y ago

This could as easily have been titled why X will be the most profitable social media IPO ever. It reads more like someone is hoping for them to fail and is grasping for reason to justify this unpleasant emotion. Snapchat established itself in a challenging marketplace dominated by large, successful and well funded companies. Something Google inspite of all its engineering prowess, financial resources and influence has failed repeatedly to do. They have not even come close. Let's give the founder some credit for gaining a large and engaged userbase. Its a huge achievement in any context and given competitors are making money there is no reason think Snapchat can't.

tedsanders 10y ago

IPOs don't really generate profit for companies. They allow one group of people to trade equity for cash and a second group of people to make the exact opposite trade. On net, society is left with exactly the same amount of equity and cash. If the IPO jumps, it means the sellers lose while the buyers win. If the IPO falls, it means the sellers win while the buyers lose. In either case, it's pretty much distributional and zero-sum. I don't understand why this headline is newsworthy. Profit is not the purpose of IPOs. (To be clear: IPOs do have purpose. They generate cashflow. And they diversify/broaden the investor pool.)