Snapchat IPO Valuation and User Growth Betting Odds
–Snapchat has exploded in popularity with 150 million users
–Snapchat’s user base grew over 25% in 2016
–Parent company Snap is preparing for an IPO with a valuation that could exceed $25 billion
Snapchat’s parent company Snap is expected to make an initial public offering in late March with a valuation that could reach $25 billion. Snap is currently defined by the Snapchat platform though they have other projects in the works. They’ve recently released ‘Spectacles’, sunglasses with video camera capabilities to record Snapchat videos. Since the ‘Spectacles’ are currently available at only one ‘kiosk’ in New York City it’s premature to speculate about their popularity. Snap has insisted that they want to be a ‘camera company’ and that more hardware devices are in the pipeline, though there are no specifics at this point. In late 2016, they bought an Israeli augmented reality startup and it’s apparent that they want to expand their product offerings into this promising new market.
For now, however, it’s all about Snapchat. Social media types have dubbed 2016 the ‘Year of Snapchat’ and the company is hoping to parlay that into a massive IPO. There’s definitely a lot to like–the company has over 150 million daily users. They’ve also done a good job of monetizing their platform and although they’re a relatively new marketing channel brands are very enthusiastic about it. Many advertising and marketing industry insiders predict that Snapchat will sell nearly $1 billion in advertising revenue in 2017. Also adding to Snapchat’s appeal for advertisers–their user base is young and highly engaged. 32% of their daily usership are 18-24 years old followed by 25% of 25 to 34 year olds. On the other hand, these numbers under represent the importance of the teen and ‘twenty-something’ demographic to Snapchat’s fortunes. Over 67% of cellphone users 18-24 use Snapchat but that drops to 37.9% in the 25-34 age group and just 14% for cellphone owners over the age of 35. Compare that to Facebook, which has usership percentages of over 70% in every age group.
WILL SNAPCHAT BE ANOTHER FACEBOOK?
There are some that think Snapchat will become another Facebook–initially leveraging a youthful user base en route to becoming a ubiquitous part of the Internet experience across demographics. Mike Lobikis, head of sales for integrated production company Tool of North America, suggests that Snapchat simply needs time to grow: “Snapchat just needs time. A year ago, they were a punchline for sexting and known for sending stuff you want to disappear. Now … it’s a massive pivot and growth story in a short period of time.”
Also working in Snapchat’s favor–the people that use the platform use it a lot. According to Nielsen research commissioned by Snapchat its users watch more than 10 billion videos per day, an increase of over 350 percent in the last year. In the US and Canada, Snapchat has over 60 million daily users and it reaches 41% of all 18-to-34-year-olds in the U.S. The most bullish proponents of Snapchat suggest that the platform is ‘redefining’ the way that people are consuming media. They also suggest that Snapchat has a more ‘unique’ take on content creation than rivals like Facebook or Instagram. Most importantly, perhaps, it’s exclusively mobile and unlike online ads which are increasingly being blocked and filtered Snapchat users actually seem to like engaging with brands on the platform.
A DIFFICULT BALANCING ACT
Snapchat faces several challenges to their continued growth that present a very difficult ‘balancing act’ for the company. The most pressing–to expand their demographic beyond the ‘Millennial’ demographic. To justify their lofty valuation Snapchat must convince investors that they can continue to grow their $1 billion ad revenues into multiple billions. To do this they need to broaden their user demographics while increasing the overall number of users. The jury is still out on whether most 35 or olders ‘get’ Snapchat. The company has redesigned their app to make it easier to use and ‘less confusing’ but that won’t convince the older demographic that they need Snapchat in the first place. Facebook’s value proposition is obvious to just about everyone regardless of age. Snapchat needs to figure out how to ‘sell’ older users on the platform in the first place. While they’re doing that they need to keep their current user base engaged and not lose them to a different platform as they get older. They also need to maintain their ‘youth appeal’ to stay ‘cool’ with teenagers.
Not only do they need more ‘eyeballs’ they’ll likely need to create more opportunities to expose them to ads. This presents another problem–at what point does the increased advertising undermine the user experience? As a corollary to this they need to secure more ‘unique content’ to further deliver advertising. This imperative has drawn comparisons to Twitter–a popular platform that fizzled after their IPO simply because of difficulty in leveraging it for advertising and monetization. There have also been some complaints from advertising and media professionals that Snapchat ads don’t lend themselves to ‘demonstrating ROI (return on investment)’ and are good only for ‘brand awareness’.
They’ve also got to keep the Snapchat platform unique. Otherwise, a competitor could leverage a large user base and offer a similar product. Facebook owned Instagram has already done this with ‘Stories’, a very Snapchat-esque addition to their app. They’ve already reached 150 million daily active users for the ‘Stories’ feature which is right around the same number of daily active users as Snapchat. Facebook messenger has also added some more ‘Snap-esque’ features as well.
Snapchat’s growth story and potential is compelling but there are a number of obvious concerns. The question now is will these concerns impact the IPO? We’ve got a whole assortment of betting odds posing just that question as well as many others concerning Snapchat’s user growth:
SNAP/SNAPCHAT IPO SPECIALS
IPO AND FINANCIAL SPECIALS
Will the valuation of the Snap IPO exceed $25 billion US?
Yes: +120
No: +-140
Will the valuation of the Snap IPO exceed $22.5 billion US?
Yes: -130
No: +110
Will the valuation of the Snap IPO exceed $20 billion US?
Yes: -210
No: +180
Initial share price of Snap stock?
Over $15.1 per share: -150
Under $15.1 per share: +130
Which IPO will be bigger:
Snap (2016): -110
AliBaba: (2014 22.8 billion US) -110
Snap IPO date:
Before 3/31/17: -450
After 3/31/17: -+300
Snapchat 2017 global advertising sales?
Over $750 million US: -170
Under $750 million US: +150
Will Snapchat hit $1 billion in worldwide ad sales in 2017?
Yes: -130
No: +110
Which company will have the highest worldwide ad sales in 2017?
Snapchat +$1.5 billion: +110
Facebook: -130
USER DEMOGRAPHIC SPECIALS
Snapchat Monthly Active Users on 6/1/17:
Over 350.5 million: -150
Under 350.5 million: +130
Snapchat Monthly Active Users on 12/31/17:
Over 405.5 million: -130
Under 405.5 million:+110
Snapchat Daily Active Users on 6/1/17:
Over 180.5 million: -150
Under 180.5 million +130
Snapchat Daily Active Users on 12/31/17:
Over 195.5 million: -120
Under 195.5 million: +100
Snapchat Daily Active Users in the US and Canada on 6/1/17:
Over 60 million: -140
Under 60 million: +120
US Snapchat Users on 6/1/17:
Over 62.5 million: -130
Under 62.5 million +110
US Snapchat Users on 12/31/17:
Over 66.5 million: -120
Under 66.5 million +100
Most popular social networks of teenagers in the United States as of 6/1/17:
Snapchat: -125
Instagram + Facebook: +105
Will the Snapchat US population user penetration rate on 12/31/17 be?:
Over 20%: -150
Under 20%: +130
Will the Snapchat penetration rate among social media users on 12/31/17 be?:
Over 34.5%: +110
Under 34.5%: -130
Snapchat usage penetration among Canadian teenage internet users as of 6/1/17:
Over 82.5%: -110
Under 82.5%: -110
Snapchat usage penetration among Australian teenage internet users as of 6/1/17:
Over 83.5%: -130
Under 83.5%: +110
Snapchat usage penetration among Swedish teenage internet users as of 6/1/17:
Over 88.5%: -120
Under 88.5%: +100
Snapchat usage penetration among UK teenage internet users as of 6/1/17:
Over 85.5%: -130
Under 85.5%: +110
Snapchat penetration rate among US cellphone users 25-35 as of 6/1/17:
Over 38.5%: -115
Under 38.5%: +105
Snapchat penetration rate among US cellphone users age 35+ as of 6/1/17:
Over 15.5%: -130
Under 15.5%: +110
Snapchat penetration rate among US cellphone users age 55+ as of 6/1/17:
Over 3.5%: -120
Under 3.5%: -120
Percentage of US college students with Snapchat account as of 6/1/17:
Over 55%: -120
Under 55%: +100
Snapchat Videos Served Per Day as of 6/1/17:
Over 12.5 billion: -150
Under 12.5 billion:+130
Snapchat user data requests by US Federal Authorities between 1/1/17 and 6/30/17:
Over 1750: -210
Under 1750:+180
Snapchat user data requests by US Federal Authorities between 1/1/17 and 12/31/17:
Over 3650: -180
Under 3650: +150
Will Snapchat CEO Evan Spiegel and Miranda Kerr marry on or before 6/30/17?
Yes: +375
No: -450
Will Snapchat CEO Evan Spiegel and Miranda Kerr marry on or before 12/31/17?
Yes: +350
No: -425