What Does Snapchat’s IPO Mean?

From initial defiance to genuine competition, Snap Inc. takes on tech’s giants


When Facebook debuted its Snapchat copycat Poke in December 2012, almost everyone expected it to crush the often glitchy, two-year-old competitor. Having been rejected by Snapchat founder Evan Spiegel, Mark Zuckerberg and co. waged all out tech war with the fledgling app. The David and Goliath conflict was complete with shady secret sit-downs in which Facebook essentially threatened to crush the competition and employees at Snapchat reading Sun Tzu’s The Art Of War on command. Poke topped the iPhone app store for three days, but then it was gone, leaving only a now heavily publicized Snapchat to reap the spoils.

Later, in what must’ve been an embarrassing move for Zuckerberg, Facebook offered to acquire Snapchat for the mouthwatering sum of $3 billion. Many opined that the sum was ludicrous, and that Spiegel’s subsequent rejection of it would prove to be one of the most costly personal missteps in tech history. A $750 million personal windfall for him and co-founder Bobby Murphy was deemed not ‘interesting’ enough, and the pair have worked to turn Snapchat into a true threat to Facebook, rather than just a shiny newcomer.

Three years on, and the newly renamed Snap Inc. has gone from strength to strength. Such is the progress made at the five-year-old company that the $3 billion offer is now dwarfed by a projected post-IPO valuation of $25 billion. Snap’s listing, expected as early as March next year, will be the biggest social media listing since Twitter’s in 2013. According to the company, Snapchat has seen a 350% increase in use over the last 12 months, with over 10 billion videos views every day. According to BBC News, a funding round in May had Snap valued at $18 billion, and the money was raised easily enough to suggest that investor interest was fervent.

It’s not difficult to see why, with Snap offering something completely different to its competition and picking up 150 million daily active users along the way. The company has been innovative in its monetization strategy, with brands producing their own Snapchat content and paying to be featured in its Discover section. The company has also experimented with featuring branded messages between user generated content, and the scope to continue experimenting with monetization is great.

Snapchat has cornered the younger audience. According to Mashable, a study of about 6,500 US teens looked ’to see what they felt was the most important social network, and Snapchat took 28% of the votes. Instagram came in close-second with 27%, followed by Twitter and Facebook.’ The startup has consistently introduced new features with no crippling missteps - both filters and stories, for example, have proven wildly popular and have been replicated eagerly by other large tech companies. If it’s to continue building successful products and monetization strategies to compete with the likes of Alphabet and Facebook for ad revenue, it will need investment.

Interestingly, Snap’s IPO is also part of its journey to becoming a ‘camera company’ rather than just a platform. Along with the name change, Snap has been developing hardware to compliment its digital offering. Its Spectacles, set to be released in the near future, will sell for $129 and are more like a ‘GoPro for your face’ - as one Snap employee told Business Insider - than a Google Glass. Though the company insists the sunglasses are to be taken as a toy, the move suggests a desire to diversify revenue to protect from disruption down the line. Again, to roll out a piece of hardware successfully, Snap will need capital behind it that can compete with its much larger competition.

And, finally, the IPO will mean Snap can attract bigger and better advertising customers. Going public means that Snap will have to disclose far more information regarding its finances, a measure that will reassure a more diverse portfolio of advertisers to spend top dollar on the platform. If Snap is serious about going after digital advertising’s key players - Facebook and Alphabet - the move to go public could be a step in the right direction. From investment capital to ad revenue, Snap’s IPO makes a great deal of sense and, given its size and scope to take on some of the world’s biggest tech companies, it just might be 2017’s biggest. 


Image: ThomasDeco / Shutterstock.com

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