Snapchat IPO: What Marketers Should Watch
Snap Inc. — a.k.a. the notoriously secretive company formally known as Snapchat — is officially makin’ moves towards an IPO. What does a Snapchat IPO mean for brands and advertisers? For starters, a deeper (and long sought-after) look into the app’s stats, finances, and overall potential as a viable platform to invest ad dollars.
With the veil lifted, and an easy $20–25 billion valuation at stake, the company faces an interesting road on its journey to Wall Street. And by interesting, we mean proving they’re not feeling haunted (in the long-term, at least) by competitors set on cloning Snap’s key features.
Let’s take a look at some of the more notable bits in the Snap Inc. filing, as well as what the dancing ghost is up against when it comes to the behemoth that is Facebook and Instagram.
Snap Inc. pulled in $404.5 million in revenue during 2016, up 589% from $58.7 million in 2015. However, its net loss that year was $514 million, so the cost of revenue is higher than the actual revenue.
The year before Facebook’s IPO, they were already bringing in profit…but, it is also important to note that Facebook waited until eight years after it was founded to IPO, whereas Snap Inc. has only been around for five. With that amount of sales growth in the past year, the lack of profit shouldn’t necessarily spook you yet.
Snapchat User Engagement
Snapchat has 158 million daily users, which might not seem particularly significant when up against Facebook’s 1.23 billion and Instagram’s 150 million users on their Story feature alone.
It is important to note, Snapchat’s users turn to the app for uses the competition doesn’t offer. Snapchat’s edge here is its role as a communication platform above other things. While they do offer content under Snapchat Discover, people primarily turn to Snapchat as a way to talk to each other…and not in the “keep in-touch with old friends’” kind of way that Facebook offers.
The different filters and stickers Snapchat offers essentially makes the conversations users already have more fun, adding to its appeal.
Through different filters, the app is able to seamlessly (and jokingly) sprinkle in advertisements that users actually want to engage with. What could be more of a draw for this app to marketers and investors? Its core demographic happens to be a group that most ad buyers love to target: teenagers.
Relevance is Key
One of the biggest questions to consider when it comes to Snap Inc.’s IPO success is “How will Snapchat remain relevant?”
With Facebook essentially duplicating Snapchat’s core features, how can Snapchat appeal to potential new users? It would seem a little silly for users to crossover, should they already have Facebook (which most everyone does), when Facebook offers the same features.
Snapchat’s competitive edge, which admitted in their IPO filing docs is not much of a competitive edge at all, is innovation.
If Snapchat continues to roll out with cutting edge updates and features, not only will its current user base remain engaged, but it will to keep its appeal in an effort to acquire new users.
While we aren’t recommending taking out a second mortgage to buy up Snap Inc. stock on IPO day, we are saying the platform has potential.
This ghost has proven to be tricky, rolling out new surprises on a regular basis. If Snap Inc. can stay ahead of the innovation curve, their stock and user attention will be worth buying into, for marketers and investors alike.
Originally published at www.bluebearcreative.co on February 15, 2017.