Four Reasons Why Buying Snapchat Stock Is A Good Bet
Snap Inc, the holding company for Snapchat and Spectacles, has an initial public offering set for sometime this year. It is set to be one of the largest IPO’s in 2017, unless Uber or Xiaomi decide to go public.
Some are downplaying the value of Snap Inc—reportedly $25 to $30 billion—pointing to the lack of profit, low revenue, and a new style of advertising that marketers don’t trust as much as regular TV and Google AdSense. The company also lacks a diversification strategy, like Facebook did pre-IPO, which might force Snap Inc to spend billions becoming a multi-network company, like Facebook and Google are today.
For the doubters, here are four reasons why Snap Inc looks like a good deal and should be a positive stock to own for long term traders (5–10 years).
The owner of Snapchat, Evan Spiegel, has made a few moves that have become classics in the tech ownership world. Spiegel and his chief technology officer Bobby Murphy will exercise 70 percent of the company’s shareholder voting power, similar to the structure at Facebook and Google. This means that Spiegel doesn’t need to own most of the company’s stock—though he likely will in the early days—to make all the key decisions.
This move is critical as it allows Spiegel to exercise complete independence from the board and total control over his company. Innovative ideas, large acquisitions and major changes can all be shot down by shareholders fearful of their own bank balance.
Spiegel has already shown a knack for smart decision making and thinking outside the box. The company’s moved into publishing around the same time Facebook and Google launched Instant Articles and AWP, respectively, but unlike both of those programs, Snapchat didn’t pay publications to sign-up, in fact, it forced some to pay for the privilege of working on the platform.
Spectacles, which could have had the same PR disaster Google Glass suffered in 2013, were well received by critics and customers. Spiegel managed to use the Snapchat brand to successful make computer glasses cool, even if they are unlikely to hit the mainstream this year.
While his personal life and personality may be questioned, there’s no doubt Spiegel is capable of running Snap Inc and gaining full control of his company early on should avoid disasters like Twitter, where multiple shareholders cannot decide on the future.
As mentioned before, Snapchat has opened the doors for a new style of news publishing. It is informal, interactive, and innovative. Dozens of popular newspapers and magazines are involved in Discover, everything from Daily Mail Online, to the Economist, to National Geographic.
Discover opens up an entire new network for Snapchat, not only providing people with the daily news and gossip, but hosting live events and setting internet trends. All of this beefs up Snapchat’s engagement numbers.
Building a platform from within an app is hard work, but it’s something more social networks are doing to keep users inside the app for longer. Snapchat’s chat function is attempting to do this, by adding call, video chat and direct photo functionality.
Snapchat will continue to add services for chat, like payments, to make users spend more time doing things on the service. Like Facebook Messenger, the goal is to reduce time spent moving from one application to another, by cramming as much functionality into the chat experience as possible.
An added side-benefit to the increased usage is increased chance to sell an item, show an advert, or take a slice of a third-party app’s service. Say, for instance, if Uber connects its platform to Snapchat’s chat and people are now allowed to book via the chat, Snapchat may look to take a few pennies every time someone books a cab through the app.
The Facebook Method
Before Facebook’s IPO, the company was a social network. That was it, the largest social network in the world, connecting hundreds of millions of people together. Fast forward four years, Facebook is a messaging behemoth with Messenger and WhatsApp, it has one of the largest photo sharing platforms in the world with Instagram and it owns one of the most interesting and talented virtual reality companies in the world, Oculus.
Snap Inc doesn’t need to be as acquisition heavy as Facebook, but there is clearly room for the young startup to experiment with new services and acquisitions that make sense.
Snapchat is the platform young people still trust to send pictures, messages and perhaps money without anyone else knowing. That brand identity is powerful and it allows the company to enter into other security, privacy and secrecy markets that are unexplored or explored by the wrong companies.