All eyes are on Snapchat parent Snap Inc., which itself is looking to a bigger stage.
Snap is expected to stage one of the most highly anticipated public offerings of the year this spring and new details on the company’s financials could become public as early as this week. According to published reports, the company’s IPO paperwork, which reportedly was filed privately with the Securities and Exchange Commission last year, could become public this week. Snap declined to comment.
When the company’s financials are unveiled, investors, advertisers and competitors will be going through the filing looking for details from the notably secretive company, including, user numbers, key investors and sales and profit figures.
“Everyone is definitely watching the Snap IPO,” said BlueRun Ventures partner Cheryl Cheng, adding that it will be telling to see how companies go public in this current macroeconomic and political environment. “For me, the last several years were much more about enterprise software IPOs. Those companies had predictable revenue models and forecasts that the street could understand.”
She said that consumer-oriented tech companies have typically had a big “pop,” followed by a decline, and that it will be interesting to see if Snap follows that trajectory. She anticipates that investors will be most eager to get a more complete picture of Snap’s revenue and growth numbers.
“I am also interested in understanding where they are investing for their new products and platforms, as they are now positioned as a camera company,” she said. “User growth is, of course, important — and the cache of Snap has been that they get the Millennials. Facebook also got the young people when it started, and then those young people grow up. So will Snap’s users.”
The company is expected to be valued at as much as $25 billion. According to eMarketer, Snap logged ad revenues of more than $366 million last year and are on course to reach $935 million this year.
“It will be interesting to see how [an IPO] impacts Snapchat, where measurement has been a continual question for brands looking to tap into their user-base,” said Kamiu Lee, who is head of business development and strategy at Activate by Bloglovin’.
For now, she said: “Influencers don’t have official opportunities to monetize, though there are influencers who are doing side deals with brands. While influencers aren’t going to be the big story for Snapchat just yet, when you consider the developments around Instagram Stories and Instagram’s already strong measurement offering for influencers, there will be a bit of pressure for Snapchat to begin to focus more on these types of offerings.”
Last fall, the ephemeral messaging platform that started as Snapchat-formed parent company Snap Inc., and introduced its first hardware product, a video-capturing pair of glasses called Spectacles.
Evan Neufeld, who is vice president of intelligence at research firm L2, said that he will be looking at how Snapchat monetizes its users and the average revenue generated per user from advertising.
“It would be very interesting to find out the story behind their subscription numbers,” he said. “How much are they actually growing? What percentage of their users is active? Everybody quotes these big numbers like there are one billion people who use Facebook — but the reality is that only 10 percent of those billion people are the ones generating all the usage on the platform.”
Neufeld added that he is curious to know more details about user demographics, such as what percentage of the audience is Millennials, male versus female and affluent versus non-affluent.
“All of that will allow us to get a better understanding of what the future of the company actually is, and by extension, what its valuation should be,” Neufeld said.
The five-year-old company has recently been tweaking its advertising options and its guidelines. Most recently, it began letting advertisers take a television-style approach to paying for ads using Nielsen’s digital ratings. It also updated its rules around “sensitive” information within its Discover section to prevent content such as “profanity, overly sexualized content and violent content” from appearing as publisher tiles that are seen by all Snapchatters, and to ward against inaccurate content.
A September report from eMarketer found that Snapchat claims a 32 percent share of social network users in the U.S., but only 2 percent of social network ad dollars with competition from Facebook and Twitter.
Principal analyst Cathy Boyle said that advertisers are particularly attracted to Snapchat for its reach among Millennials and Gen Z. “To engage those often hard-to-reach consumers, Snapchat has expanded its advertising portfolio over the past year to include a wider array of video ads, and more sponsored geofilters and sponsored lenses,” Boyle said, adding that “what it has yet to prove is whether it can consistently deliver a better return on investment for advertisers than other social networks.”