It has been almost five years since the launch of Snapchat. Now named as Snap, the smallish startup company (aka Snapchat) is planning to go public. The company already filed for an initial public offering on New York Stock Exchange. It picked up the ticker symbol “SNAP.” The company is hoping to raise $3 billion and says that it has 158 million daily active users.
The IPO values the company above $20 billion. Now, this is an interesting time for Snap. The company is initially known as Snapchat. It plans to become primarily as a camera company instead of just an app developer. It is already successful with spectacles. We are aware how popular the video recording sunglasses have become.
A tough decision for Snapchat
We already know that Snapchat had a major tussle with Facebook and Instagram. For five years, Instagram was focused on beating Snapchat, but it couldn’t. Finally, when Instagram launched Instagram Stories, the feature exactly similar to Snapchat Stories, could bring Instagram close to Snapchat. From that time onwards, the number of users of Snapchat Stories declined and Instagram Storie’s users gradually increased. What remains an issue is, if Snap goes public, this might also lead to losing its reach for users.
It lost a lot of money in the past
The company says that its advertisement business is growing rapidly and it reported $58.7 million as revenue in 2015. The income grew to be $404.5 million in 2016. But then it had to face losses too. The company lost $372.9 million in 2015 and also $514.6 million in last year. Twitter also struggled a lot when it went public; only Facebook didn’t. In the S1 filing, the company also says, “We have incurred operating losses in the past, expect to incur operating losses in the future, and may never achieve or maintain profitability.” Now, this is something you don’t expect from a startup.
According to Snapchat-the founders made the decisions
Snapchat has never opted for the help of celebs or influencers for promoting their platforms like Twitter, Instagram, and YouTube. Analysts are of the opinion that Snap might focus on engaging the core user base. Snap will have the dual class stock structure which consolidates control among few key executives. In the S1 filing, Snap said, [quotes quotes_style=”bquotes” quotes_pos=”center”]Our two co-founders have control over all stockholder decisions because they control a substantial majority of our voting stock. The Class A common stock issued in this offering will not dilute our co-founders’ voting power because the Class A common stock has no right to vote.[/quotes]
Snap considers Apple as competitor
Snap is a small startup with 1800 employees, and Apple is a well-established company with more than 80000 employees. Still Snap feels that Apple is its competitor. In the SEC filing, Snap mentions Apple as their competitor. Also, it says Facebook, Google, and Twitter as its competitor too. But these companies are in business primarily with Snapchat, while Snap will be focused on the camera. They are looking to compete with other enterprises in every aspect. The companies like Apple, Twitter, and Google (Including YouTube, Instagram and WhatsApp) have greater financial and human resources.
According to the risk factor listed in Snap’s filing, “We compete broadly with the social media offerings of Apple, Facebook, Google, and Twitter, and with other, largely regional, social media platforms that have strong positions in particular countries.”
Here is where Snapchat might worry
A major problem for Snap is, Apple might use the dominant position in the smartphone market to remove Snap from competition. Rumors are also there that Apple is working on developing a Snapchat like video editing product, probably in its camera App. The areas where Snap might face competition from Apple, Facebook or Google are as follows:
- Integrating social media platforms or features into the products that they are controlling like search engines, mobile OS, and Web browsers.
- Acquiring similar of complimentary services or products.
- Competing Snapchat’s accessibility and usability by developing better hardware and software on which the Snapchat app operates.
The Snap spectacles have already put the company in close competition with Apple because Apple does not have glasses product to compete. It is called “a toy” by Snap CEO Evan Spiegel. The company didn’t release many details about the IPO, but reports say that it will be between $20 to $25. SNAP INC. filed the necessary paperwork, but they used JOBS ACT provision. It allows companies with less than $1 billion revenue to avoid going in public with their plans.