
Snap values itself at nearly $24B with its IPO pricing - hoov
https://techcrunch.com/2017/03/01/snap-values-itself-at-nearly-24b-with-its-ipo-pricing/
======
oculusthrift
Over the past years(as a new grad) I thought that I would've killed to work at
Snapchat, Fitbit, Uber, or Twitter. Now, I wouldn't touch any of those
companies with a 50 foot pole. I've grown extremely cynical about startups and
the extreme hype that surrounds them.

That being said, at Internapalooza this year, the longest line there was for
SnapChat and every young person seemed enamored with them. And I remember a
time where everyone was screaming that Facebook would fail because of it's
lack of profit or that Twitter was the next Facebook/Google.

This is all a long way of saying that no one knows what the hell they are
talking about when they discuss these companies. Whether that's posters on HN,
financial talking heads, or even successful people in Silicon Valley. If you
have some advantage on the market, and can predict the correct valuation of
Snapchat, then:

1\. Put your money where your mouth is. Buy or short the IPO.

2\. It's probably wise to not share your take as it relinquishes the advantage
you think you have on the market.

3\. Hope you stay solvent longer than the market stays irrational.

Just remember, these same "experts" said that no one needed DropBox when they
had wGet.

~~~
warcher
I definitely don't get snapchat. Too old, not playing.

That said, if you don't understand a company, man, you should stay far, far
away from investing in it.

And I _don 't_ use DropBox. I use Google Drive. For free.

Where's that Dropbox IPO at anyways?

~~~
Grazester
I downloaded Snapchat when they first busted onto the scene to see what it was
all about. I was constantly being told by a close friend to download it so
that she could snap with me.

I thought it was a poor means of communicating and though the snaps were just
noise that I didnt need.

I jumped onto Facebook's IPO but snapchat I definitely wouldn't touch.

~~~
nojvek
I use snapchat every single day. Not a Facebook user anymore. They've got a
really stronghold on 18-25 year old market.

Facebook sees snap as a threat and they literally ripped snapchat in whatsapp
"status".

I can't say that it will beat Facebook but I'm willing to bet it will be more
valuable than twitter. I will buy if it's share price is not too hyped.

------
pavlov
People are asking if Snap is more Twitter or Facebook. From my (light)
exposure, it doesn't seem like either. It's more like a lifestyle-aware
replacement for Apple Messages + Camera -- two of the most heavily used apps
on any phone. (For Android, replace Apple Messages with whatever Google calls
their text chat app this week.)

The closest comparison could be WhatsApp, and that was valued at $19 billion.
So I'm not sure that Snap's valuation is as outrageous as it seems based on
traditional metrics.

Also, I've been really impressed by the design of the Spectacles. The yellow
charging case is a brilliant way to make the glasses lighter. Snap is the only
major tech company that understands anything about playful design -- Apple,
Google, Facebook and Microsoft are all treading the same safe paths of post-
Jobsian blandness.

~~~
seanmccann
I think when people say is Snap a Twitter or Facebook they are wondering if it
will +350% or -60% in the first few years after IPO.

~~~
iLoch
Snap's data has real value, like Facebook's. For most of their users, they
have a large portion of their phone's contacts (whether you opt in or not is
irrelevant due to your contacts opting into this + a network effect.) They
also have media preferences based on what articles you're watching/reading.
They also know who you're most interested in (who's stories you're watching
most, and who you send/receive snaps from the most) and what their interests
are, so they can potentially infer interests from that too, even if you don't
read articles. They have location data turned on for most of their users
thanks to geo filters, and if they've been "good" data miners, they're sending
your facial mapping home when you do a face filter effect. I'd be surprised if
Snap doesn't have the most comprehensive faces database out there with all the
angles they get from selfies (though they may not have the most unique faces.)

Oh yeah, and they also have the perceived privacy that Facebook doesn't have.
Deleting messages doesn't actually delete them, but it just feels better when
they're gone, so people are more candid on Snapchat.

Not to mention they've also done an excellent job monetizing their features
thus far, with very little intrusion that I've noticed as a user. You get the
occasional ad when you're looking through stories, but most of the money is
coming from things like sponsored content and geo filters, which users don't
complain about.

~~~
Aunche
For what it's worth, I talked to a Snapchat engineer at a job fair, and he
told me that Snapchat is trying to focus on new products and features (like
Spectacles) more so than trying to monetize their data.

~~~
mrlatinos
I've heard that. Snap considers itself akin to a camera company. Will be
interesting to see where things go, but I don't like the valuation.

------
mattmaroon
If you have a large amount of money you don't mind gambling with and can
afford to stay solvent longer than the market can stay irrational, I feel like
this is the best short ever.

My 5 year target on SNAP would be roughly one can of Pringles. When the next
market meltdown happens, Michael Lewis will write a great book about people
buying non-voting shares of a fad company at a $24b valuation that says in its
prospectus that it has no plans to make money and maybe never will.

Or I'm wrong and they won't be a fad and will figure out how to monetize, but
I feel like the multiplied probabilities of both make it as clear a bet as you
ever get.

~~~
econner
> My 5 year target on SNAP would be roughly one can of Pringles.

What does this sentence mean?

~~~
artpar
"Pringles" is a "pack of chips" (more or less), so basically he means, "a pack
of chips" is what the company will become. (this is what i understand :p )

~~~
traek
What does this clarify? "A pack of chips" isn't a common idiom.

~~~
nsm
A pack of chips is generally really cheap in any region/country, so I think in
the context, the idiom is explanatory.

------
chollida1
They are pricing right at the top of their range with this if the rumors are
true. I don't think they are announcing hte actual price until after the
close.

One one hand raising as much as possible is very nice for the company but to
temper that sentiment I think it was Robin Li, the Baidu founder, who made the
comment that while he was very happy with the first day pop his stock had, it
was an actual curse.

he was prepared to run an XX Billion dollar business and hit his targets but
with the opening day pop he was now running a 2X Billion dollar business and
that made things significantly harder than if the stock had risen gently over
the course of 4-8 quarters.

I wish the Snap team well, but they'll have a few hiccups coming.

They've been private long enough that a deluge of shares will come free
trading this year and they'll at some point have to do the tight rope walk of
switching from telling wall street to look at user growth to looking at
profits.

If you want to invest I'll quote someone sitting beside me. "The problem with
Snap is determining if they are more Twitter or Facebook."

From a wall street perspective this IPO was a bit different. It was about 10x
oversubscribed, which is alot but not uncommon. What was interesting was that
alot of mutual funds got almost full allocations and hedge funds were shut out
compared to what they would normally get.

Maybe this is a good thing?

------
philfrasty
Anyone knows their growth numbers since the introduction of Instagram Stories?
For influencers with a following in the 18+ age range this was the day a lot
quit Snapchat (including myself).

~~~
econner
This techcrunch article has what you're after:
[https://techcrunch.com/2017/02/02/slowchat/](https://techcrunch.com/2017/02/02/slowchat/).

They say growth slowed from 7% QOQ to 3.2% QOQ. Having only 3.2% Q4 QOQ growth
is pretty worrying considering they had ~14% QOQ growth in every prior Q4.

~~~
MorePowerToYou
Serious question: are the growth numbers scrutinized? How exactly are they
calculated? It seems like down-playing growth numbers pre-IPO could leave more
room for "awesome growth" in the first few post-IPO years. Maybe switch the
way the numbers are calculated at the appropriate times.

------
notadoc
> "$59 million in revenue in 2015 to nearly $400 million in 2016"

Valuation at 60x 2016 revenue with no profit? Oh boy.

Aside from that, who uses Snapchat?

~~~
hdctambien
Every single student in the high school I teach at uses Snapchat. All day.
Every day.

~~~
idiot_stick
> _Every single student in the high school I teach at uses Snapchat. All day.
> Every day._

Are high-school students a lucrative market (and I'm not talking the mobile ad
ponzi)? I was pretty poor at that age.

~~~
nradov
High school students have a lot of influence on what their parents spend on
them for certain things like consumer electronics, restaurants, family
vacations, clothes, etc. "Mom please buy me an Xbox for Christmas!"

------
zachrose
I don't use Snap products, but from my totally uninformed, unengaged vantage
point it seems to me that Snap is valuable because they present a different
set of values to their users then Facebook, Google, etc.

Their first product wanted to challenge the permanence of our digital stuff.
(Forget the underlying technology.)

The glasses are about challenging this kind of Google/Apple model of the
person as some elegant cyborg from the Jetsons. They offered a toy for, like,
just goofing off.

I imagine users like it because it's not crammed with ads and spam yet.

$24B is about half of what it costs to build high speed rail from LA to SF, or
a third of what it might cost for a manned mission to Mars.

Compared to what it probably costs to operate and develop, $24B sounds
redonkulous. Compared to those other projects, it's hard to see what Snap has
that's so rare.

Maybe the better comparisons are Nike (market cap $95B) and Coca-Cola ($182B).
Snap is using near-commodity economic inputs and outputs to express a point of
view and build a brand.

All of this is speculation from my deep crater of ignorance.

------
owenversteeg
Somehow I've managed to see exactly zero comments about Whatsapp stories in
this thread, which really surprises me. I think that's a hell of a lot more
scary to Snapchat than Instagram stories. Most people with Instagram have
Snapchat, but most people with Whatsapp do not have Snapchat.

For those who don't know (and I don't know much) Whatsapp just launched a
stories feature, similar to Instagram or Snapchat.

~~~
exolymph
> I think that's a hell of a lot more scary to Snapchat than Instagram
> stories. Most people with Instagram have Snapchat, but most people with
> Whatsapp do not have Snapchat.

Neither of these sentences is accurate.

~~~
owenversteeg
The first one's an opinion. In the second one, 'most people with Whatsapp do
not have Snapchat' is just simple math - there are more than twice as many
Whatsapp users compared to Snapchat. 'Most people with Instagram have
Snapchat' is anecdotal, sure, but do you think that more than 50% of Instagram
active users do not actively use Snapchat? I only know a handful of people
that have Instagram that do not have Snapchat, and only two of those people
are active Instagram users.

From your profile I can see you're a reporter, so if you have any access to
hard data about this I'd love to hear what the real numbers are. Thanks!

~~~
exolymph
Instagram has ~400 million DAUs whereas Snapchat has ~160 million. Even if
100% of Snapchat users have Instagram accounts, it's still not most Instagram
users. Maybe you're indexing on a different number, rather than DAUs?

Wasn't objecting to the part about Whatsapp, you're right there!

~~~
owenversteeg
Oh shoot, you're right! I only bothered to google Instagram DAUs and didn't
even bother for Snapchat, assuming they'd be pretty far past 200MM. I stand
corrected.

Cheers!

------
trungonnews
SNAP will be the best short once it crossed $50B market cap.

------
bostik
What I find really interesting in that number is that according to Matt Levine
the IPO has been already oversubscribed 10 times.[0]

This kind of number strongly implies that one can expect the immediate post-
IPO valuation to be quite a bit higher. However, once the aggressive stock
flippers are done, there's no telling where the stock price finds its
equilibrium.

0:
[https://www.bloomberg.com/view/articles/2017-03-01/snapchat-...](https://www.bloomberg.com/view/articles/2017-03-01/snapchat-
indexes-and-free-research)

------
nimos
I don't see that snapchat has the lock-in to make it worth the risk. Sure you
can leave other social networks and it's always a risk but Snapchat's
ephemeral nature seems to make that risk much much worse. That said I only
used it for a week before I got annoyed by it so maybe I don't have the best
perspective.

------
bherms
Robinhood has bids starting at $16 on the IPO... I have no clue if it's a
smart buy. Anyone care to chime in?

~~~
elsewhen
this valuation expert from NYU puts the value at $13.3B (dramatically lower
than the stated IPO price)

[http://aswathdamodaran.blogspot.com/2017/02/a-snap-story-
val...](http://aswathdamodaran.blogspot.com/2017/02/a-snap-story-valuing-snap-
ahead-of-its.html)

~~~
argonaut
He's quite often wrong: [http://aswathdamodaran.blogspot.com/2012/02/ipo-of-
decade-my...](http://aswathdamodaran.blogspot.com/2012/02/ipo-of-decade-my-
valuation-of-facebook.html)

------
ChrisArchitect
What I don't understand about this is if I'm using Instagram Stories, just
because I happen to be an active instagram user....why would I ever switch to
Snapchat other than audience? I can get alot of the same audience on Instagram
already. Stories does the trick mostly

------
symlinkk
People my age (22) just use Snapchat to flirt or post pictures of parties. No
one - and I mean no one - ever checks out the articles in the Stories section
of Snapchat. I really don't see any way for them to make money at this point.

~~~
epa
People my age drive down the road and listen to music. No one - and i mean no
one - ever checks out the advertisements on the side of the road. I really
don't see anyway for them to make money at this point.

------
knd775
That's a number that makes the $3B Facebook offered them look quite small.

------
nooron
Snapchat is Comcast for your face, without the need for pipes. They want to
own the distribution of video content on mobile (and eventually AR), whether
it comes from your friend or from NatGeo. Right now, it's hard to get started
on Snapchat for small vendors. It makes a lot more sense for large companies.
This differentiates its strategy from Google and Facebook in a big way -- it's
more demand generation (which FB also serves) than end-of-pipeline marketing.
I am not sure how this limitation affects its growth potential. Thoughts? Will
they open it up to smaller clients? How will the limitations of the format
affect ads?

~~~
exclusiv
I'm sure they will open it up more broadly at some point. Right now they can
ensure that the big brands create more compelling ads and have control over
it. We'll definitely see more portrait video content moving forward.

Do you know if the ads they started running are forced viewing? Are they
injected like interstitials before you can digest your friends' content?

If so, that's compelling for an advertiser but likely to kill the service IMO,
as young people will easily defect.

~~~
nooron
Yes, there are now interstitials. They are not mandatory though -- you can
swipe past.

------
quickben
My take:

The most important thing is the non voting shares. Big money will be staying
away from that IPO.

~~~
sushid
Completely untrue. The IPO is already 10 times oversubscribed. [0]

[0]
[http://video.cnbc.com/gallery/?video=3000597530](http://video.cnbc.com/gallery/?video=3000597530)

~~~
quickben
As I say, that was my assessment. I just wanted to be friendly and share my
views.

But, people are free to do whatever they want with their money. Just keep in
mind that Snap isn't AMD, and snapchat CEO+board inspire opposite of
confidence with their public statements. I won't even go into their financial
predictions, aspirations and what they plan to do with the money. Just because
the capital is oversaturating lately, doesn't mean all IPOs will go up.

------
curiousgal
I see 0 value in Snapchat. Besides, how is it even being monetized?

Edit: I meant 0 value as in 0 _added_ value. See mrweasel's comment below for
more details on the second point.

~~~
askafriend
You don't see value in an engaged audience of nearly 300 million people using
a product regularly? Really? Zero? I think that's an incredibly unfair and
naive thing to suggest to be honest.

~~~
mrweasel
Well maybe not zero, but certainly not anywhere near $24B. There is no clear
way of injecting ads into Snapchat, and in many markeds users could just
revert back to SMS at no cost, so charging for the service will only work in
some markeds. Assuming that engaged users equal profit is more or less the
reasoning that brought us the .com bubble.

I won't suggest that that one could'nt turn a profit on Snapchat, but one
false step and those 300 million users will leave faster than they came.
They've already been taught that Snapchat is a free service, that will be hard
to change. And VCs are ready to fund the next Snapchat the minute that the IPO
hits, so the users won't have to wait long for their new free alternative.

Snapchat is a fun opportunity, if the price where $10-20 million.

~~~
czinck
Sorry, but this is nonsense. Snapchat already has 2 forms of ads (paid filters
and sponsored stories), and $400m in revenue on "only" $450m in costs. Saying
SMS will replace snapchat is like saying horses will replace airplanes; anyone
under 30 with a smartphone is way past that. For me, only a little older than
the main snapchat demographic, it's replaced most of my use of Hangouts (which
replaced SMS, but is basically interchangeable with whatsapp/whatever as far
as I'm concerned), and completely replaced Facebook. If I used twitter, it
probably would have replaced that too. I have several snapchat friends that I
literally don't even have their phone number.

Get a few big celebrities using the snapchat glasses courtside at an NBA game
or from backstage at a concert or something and watch snapchat explode. I was
at a wedding with those glasses and you should have seen how much everyone of
all ages loved the glasses.

If their valuation was <$10B I'd be all over this IPO, just $24B seems way too
high to me (I also think the whatsapp $19B was ridiculous). Their only risk is
being replaced the way I think snapchat will replace Facebook (although I
don't think Facebook will completely die), which as the evolution of websites
and smartphone apps has shown no one can predict.

~~~
aianus
Their expenses were over $900m, I don't know where you got $450m from.

~~~
czinck
You're right, the linked article says "cost of revenue" was $450m which I
assumed was a non-technical term by a writer trying to pad the article out,
but the S-1 has it all broken out including that. With everything else it was
over $900m. The S-1 has it defined as things like their infrastructure costs
(bandwidth and such?).

