February 16, 2017 | less than a minute read

Does Snap Inc. Merit a $20 Billion Valuation?

Passle

Very much the talk of the town, Snap's upcoming IPO at ~$20b is looking like a big ask to me. Especially in comparison to Facebook's IPO in 2012. Some interesting numbers to compare the two:

Facebook 2011 Revenue $3.7b
Facebook 2011 Profit $1.0b
Facebook IPO valuation (May 2012): $104b (28x Revenue)

Versus

Snapchat 2016 Revenue $205m
Snapchat 2016 Profit -$515m
Snapchat IPO est. valuation (March 2017) $20b-$25b (98x Revenue)

In comparing Snap to Facebook, I have two thoughts:

1. Facebook have many more strings to their bow. Messaging, Instagram, VR, AI, and growing. In comparison, it appears Snap's only significant offering beyond Snapchat is Spectacles, which appears to essentially be an extension of their main product.

2. Facebook aren't afraid to take on the other giants. The addition of disappearing stories to Instagram coincided perfectly with Snapchat's user growth falling by 14% from Q2 to Q4 last year, and I was reading just today that they're making movements that might turn some heads at Linkedin. I am yet to be convinced of Snap's willingness to take on other players in the social sphere.

Snapchat has been promoting its ad products and encouraging marketers to pay to play. But the ad-supported revenue model doesn’t seem to work well for the platform as it is supposed to be, at least for now. New stats from customer acquisition firm Fluent show that 69 percent of the 3,327 American adults surveyed online skip ads on Snapchat “always” or “often,” and that number goes up to 80 percent among 18- to 24-year-olds, a target group that many marketers want to reach. Although Fluent doesn’t have ad abandonment rate for other social networks like Facebook, Instagram and Twitter, its CMO Jordan Cohen thinks that 69 percent is a “big number for ad-supported companies.”