Snap Inc., previously referred to as Snapchat, will be going public after it finalized the paperwork required for the initial public offering (IPO).
The social network, popularly used by the teens and famous for the disappearing messages, announced on Thursday that it would seek a $3bn IPO although this amount will be dependent on investor demand, reports Gizmodo.
Due to its millions of users, Snap has managed to establish a thriving ad business. But despite the success in its advertisements, the company has also suffered from losses averaged to be about $900 million.
Analysts have already termed the much expected IPO as the biggest in recent years and many commentators hope that it will be as effective as Facebook. There isn’t anything to suggest that the future Mr. Miranda Kerr, CEO Evan Spiegel, will not be successful in this new venture.
There is a lot of comparison that can be drawn between Snap Inc. and Twitter, which files its first public offering 4 years ago.
One thing for sure is that Snap has been on the verge of losing millions, judging by its 2016 filing in which Snap lost $US514.6 ($671) million. Yes it made lots of money compared to 2015 but had to spend a lot to ensure it meets this goal. The increase in revenue was attributed to skyrocketing losses of about $US372.9 ($486) million in 2015.
This is best captured by Bloomberg’s Shira Ovide who explained via Twitter that Snap’s cost of revenue was much higher as opposed to the revenue itself.
“Not sure I have ever seen a public company like Snapchat, where cost of revenue is higher than revenue. Crazy,” said Shira Ovide.
Facebook went public in profits
In a sharp contrast to this was Facebook’s first IPO in which the Zuckerberg site was already making billions of dollars in profits. Twitter on the other hand had already under its name several million losses but the losses were less compared to the revenue.
Snap’s IPO comes with quite a confusing declaration – It “may never achieve or maintain profitability.”
The only advantage Snap has is that it brags of 158 million active users on a daily – far much higher than twitter’s number when it went public. However, this is less compared to Facebook’s figures. Then there is Instagram whose daily active users are more than Snap’s apart from the photo sharing platform continuously snatching Snapchat’s most promising features.
Groupon is another company that had major revenue, but also major losses. For a long time, analysts have speculated on the possibility of Snap becoming the next Facebook or it would just be another Groupon.
Snapchat ready to go public
Snap began as a “sexting” app and was experiencing a slow death before it magically evolved to meet the user whims and demands, just like Facebook has been doing. The two companies have collectively discovered that the key to surviving in the social media world is evolution. Snapchat is no longer just about disappearing messages.
The social media site has added the “Discover” section over the years where publishers can post video-heavy stories targeting the millennials.
Then there is the “Stories” feature with which you can create a narrative based on videos, photos, messages within the past 24 hours. This tool has grown to such a huge popularity that the Facebook-owned Instagram has also made its version.
Whether Snap will do well after the IPO will be determined by the site’s ability to evolve and meet new demands that arise on a daily basis.