02 Mar Snapchat Parent Company Snap Files For IPO, Will Go Public.
Snapchat is going public! Its parent company called snap has filed for an IPO (Initial Public Offering). When a company decides to go public, they file a document called an s-1 which describes the company to potential investors. In its filing, the Venice Beach based company has released the following details:
1: Snap disclosed that Snapchat has 158 million average daily active users (which is more than twitter) as of the fourth quarter of 2016.
2: It has an annual revenue of $404.4 million in 2016, a major increase of $58.5 million in 2015.
3: The company filed for a $3 billion IPO, though it is only a placeholder amount.
4: It plans to list its share on the NYSE (New York Stock Exchange) as SNAP.
According to reports, this looks to be the biggest tech initial public offering in years. The listing is expected to value Snap between $20 billion and $25 billion, the highest valuation of an American tech company since Facebook.
Despite the company not yet making a profit, advertising revenue is accounted for an average of 97 percent of Snap’s revenue. The company says most advertisers don’t have long-term advertising commitments with Snap, which is something the company hopes to achieve.
Still, Snap lost $514 million last year, compared with nearly $373 million in 2015. One difference between Snap and its rivals like Facebook and Twitter are that the older social networks own their own server farms, so the expense of operating them does not show up as a line item in the companies’ financial statements. By contrast, Snap rents storage and server space from Google.
For computing, storage, bandwidth and other needs, Snap uses Alphabet Inc’s Google Cloud platform. On Jan. 30, 2017, three days before the filing, Snap committed to spend approximately $2 billion with Google Cloud over the next five years. If that relationship were somehow disrupted, Snap said its business would be “seriously harmed.” Snap projects its hosting costs with Google growing as its user base and engagement grows.
Snap has 158 million daily active users, which is a critical measure of user engagement, as of Dec. 31, 2016. Growth in daily active users has been pressured recently, but has only grown by only 7% between the second and third quarters of 2016 followed by a relatively flat final quarter. User growth is important for attracting advertisers. Most Snapchat users are between the ages of 18 to 34 years old, a group that the company has reportedly been luring away from sites like Facebook. Users younger than 25 are the most active on Snapchat, visiting the app more than 20 times a day and spending more than 30 minutes a day, as of the quarter ended December 2016, according to snap. On average, daily active users visit Snapchat more than 18 times each day and spend 25 to 30 minutes and the service’s users send more than 2.5 billion messages and images each day.
Written by: Seyf Nasr