Snap values itself at nearly $24B with its IPO pricing
techcrunch.com
techcrunch.com
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.
And in some cases, they have vested interests in the success or failure of these companies.
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?
tl;dr you better really know what you're investing in. If you don't know, don't invest even if you miss out on the next "big thing".
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.
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.
Whether it is because the business model is terrible (they make all of their money on ads) or the app can't possible have users (it looks horrible and I can't figure it out), the end result is the same - less competition and more breathing room to have a shot at succeeding.
I'm not buying at the IPO but I'll be keeping a close eye on the stock and how Spectacles works out (waiting for a pair now.)
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.
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.
> ...they're sending your facial mapping home when you do a face filter effect...
Lenses are generated on the device. They're not uploaded to Snapchat servers.
> Deleting messages doesn't actually delete them...
From the support site: "Snapchat servers are designed to automatically delete Snaps after they've been viewed by all recipients."
https://support.snapchat.com/en-US/a/when-are-snaps-chats-de...
Context is very important when you're quoting people: "... and if they've been "good" data miners..."
And regardless of whether or not a filter is generated on device, facial data is being used, and so I'm weary that it could be sent to a server. If it's not, fine, but that's subject to change.
> From the support site: "Snapchat servers are designed to automatically delete Snaps after they've been viewed by all recipients."
So when authorities get involved, I'm sure Snap says "sorry, can't do anything for you"?
Why not? Obviously it's nonfree software so neither of us really know, but the alternative is that they're simply lying. Maybe they are, but that sounds like a ticking time bomb that would destroy them when it gets out. And it would absolutely get out, especially if they try to monetize it as an above poster suggested.
Just about every app can collect this information.
>Snap's data has real value
My only disagreement is that its all fake usernames. The friend graph is not as accurate as its like Kik, Myspace, Instagram and twitter in that people will add random people from all different sources, and make connections as there are no real threats to "real life" and "online life". with facebook you at least have a more signals into a "real life" graph and with twitter you have an interest graph. With Snap I don't think either of their signals (stories, friends) are as good.
Plenty of people have added their real names in addition to their usernames. But even if they don't, contact lists often have real names.
I'm not sure if that's how you use Snapchat, but personally (and I may be in the minority) I only add people I've either met, or who are in some capacity a celebrity. You can also typically see how close a friend someone is by how many connections they have to other friends in a user's network. Snap users (like Facebook users, I think?) also tend to mostly interact with people they're actually friends with. So at the very least I think the data Snap has is at least as high quality as FB's (and I'm not at all disappointed we're comparing more with Facebook than Twitter, as the latter has had a much more positive market story.)
>close a friend someone is by how many connections they have to other friends in a user's network
Again every messaging app that asks for contacts has these connections. FB messenger, Line, Wechat etc has more data points than snap when it comes to this.
>I'm not at all disappointed we're comparing more with Facebook
I would actually compare it closer to twitter. If they are going in the direction of media as they've already announced they are building an interest graph.
SnapChat has always looked like a solution to a "first world problem" to me. Very US and LA/NYC-centric.
Granted, I'm old, but even in rich European countries, I'm not sure it has potential to do well? (Honest question, I really wonder).
I don't have a strong opinion on Snap's IPO (I guess I hope it does well for industry health?) but I strongly push back on using private acquisitions as a barometer of IPO health.
Sony has had some designers that just get it over the decades, but sadly they're all over the place. Weird Sony is amazing - see http://www.theverge.com/2013/9/29/4783132/the-amazing-produc... .
Nintendo has also some inspired moments, but they stumble a lot.
Also, it's a bit data intensive
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.
What does this sentence mean?
I'm positioning myself for massive fiscal stimulus (that was denied the Democratic president) and higher stock prices. I guess we'll see.
The closest thing to fiscal stimulus we're likely to see is top-weighted tax cuts, which are ineffective stimulus at best, and what benefit can be derived from them has pretty well been looked over the last several decades.
OTOH, top-weighted and particularly corporate tax cuts are likely to improve stock market returns in the short term, so, maybe not so bad a position to be in if you can time your exit right.
The vast majority of their revenue is still from AdWords despite those billions being spent, but that GOOG pie's only grown over time.
Same probably goes to %99.9 of all investors as well, otherwise those %99.9 would have been rich from buying Google after their IPO.
Being short sighted is a humans' thing, probably. not a tech CEOs' thing..
A 17x return over 12 years won't make most (non-rich) investors rich unless they bet every dollar they have on said investment (a nearly impossible and entirely impractical scenario).
An average investor betting $10,000 - $25,000 on Google's IPO would be a serious investment. $170,000 - $425,000 is a great return off of that, it's just not anywhere near rich.
Had they IPO'd at something more like what tech companies used to, an investor could have seen a 250x to 1000x return up to this point. That would make you rich off of a $10k bet. Amazon for example, has produced something like a 560x return so far from the IPO.
'feeling like' is not a good way to convincing me to short something. nor long. nor anything ;)
> ..., but I feel like the multiplied probabilities of both make it as clear a bet as you ever get
So you 'feel' like it would be a 'clear bet' ? sounds like a big maybe to me.
How about NOT shorting/longing at all ? I feel like this is the clearest bet for me ;)
(edit: spacing)
Further, if anybody had actually followed any of the short advice that has been given in HN comments in the past 10 years, they almost certainly would have lost unlimited amounts of money.
If you really want to put your money where your mouth is, post some bitcoin, a term period and a price target and see if anyone takes you up one it. I'd almost certainly book everything you offer on SNAP going to $0 in 5 years.
The cost of LEAPS is very high when they are purchased on speculative companies. For example, take Tesla.
Tesla closed today at $250. To purchase an "at the money" $250 put dated January 2019 (aka a LEAP) would cost you $54. So TSLA stock would need to fall below $196 at expiration before you began to make money on it. That's a simplification because you could always sell your put early, possibly at a profit. Buying a January 2018 put would be cheaper, but still quite expensive at $37.
To reduce the cost of a put you can buy one that is "out of the money". For example the TSLA $200 put dated January 2019 would be cheaper, only $31. However, TSLA would need to fall below $169 before you made any money at expiration.
So, look at that last example. TSLA now $250, you pay $31 now and you don't make money unless TSLA closes below $169 at expiration.
Math like that is why sophisticated investors often short stock rather than buy puts. They need to pay a price to "borrow" the stock to short but for many companies that price is quite low, below 10% a year. The cost of buying put options on the same stock could be two or three times as high as directly shorting the stock.
When SNAP puts become available I expect the math to be much worse than for TSLA. It will cost A LOT to buy puts on such a speculative company. In trader talk, the "implied volatility" will be very high.
Assuming you are talking about this sentence from the "risk factors" section of their S-1:
> We have incurred operating losses in the past, expect to incur operating losses in the future, and may never achieve or maintain profitability.
That's relatively boilerplate and doesn't really mean much. The "risk factors" section is always very gloom-and-doom to avoid the appearance of over-promising returns. For example, Workday said "we have a history of cumulative losses and we do not expect to be profitable for the foreseeable future" in their risk factors. Shake Shack included "our inability to open profitable Shacks" as a risk factor in their S-1. Google listed pages and pages of "risks" that basically boiled down to "advertisers might stop using us". It's really not that unusual to say something like that.
You might be right and Snap could be headed for a big fall, but that statement alone isn't much of an indicator.
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?
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.
Valuation at 60x 2016 revenue with no profit? Oh boy.
Aside from that, who uses Snapchat?
You're kidding, right? It passed 300 million monthly users almost a year ago.
We're all tech fuddy-duddies here, still stuck on linkedin and email FWDs, we don't know nuttin' bout dat snap.
And not much more since then... Growth fell of a cliff once FB started to focus on copying their features (see Instagram Stories).
This doctor: http://www.bbc.co.uk/news/technology-38314539
> UK teaching surgeon Dr Shafi Ahmed has "livestreamed" an operation using Snapchat spectacles, which are sunglasses with a small camera integrated, allowing the wearer to record what they are seeing.
(I think he had the @NHS twitter account for this week (27th March through to 5th April)
When my younger family members who are in high school and college want to contact me, they always start the conversation on Snapchat.
It's all anecdotal, but I think Snapchat has been outside the fad phase for awhile now.
You may not grow out of snapchat, but the youngs are guaranteed to move on to something else. That's the way it's gone for everything else, no reason for snapchat to be any different.
Doesn't mean they can't build a business around the audience they have, but I think expecting that audience to continue to grow significantly over the long term is a mistake.
Are high-school students a lucrative market (and I'm not talking the mobile ad ponzi)? I was pretty poor at that age.
There's a reason Coke and Pepsi are so aggressive at advertising to that demographic.
Just like how people use Facebook before all their parents joined too.
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.
For those who don't know (and I don't know much) Whatsapp just launched a stories feature, similar to Instagram or Snapchat.
FB have effectively copied the stories feature across all of their media properties (FB/WhatsApp/Instagram). I'd imagine they'll eventually add the ability to cross-post selectively.
Neither of these sentences is accurate.
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!
Wasn't objecting to the part about Whatsapp, you're right there!
Cheers!
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-...
Trying to wrap my head around why this is any different than Twitter.
http://aswathdamodaran.blogspot.com/2017/02/a-snap-story-val...
Source: https://support.robinhood.com/hc/en-us/articles/115000902306...
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.
The most important thing is the non voting shares. Big money will be staying away from that IPO.
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.
Edit: I meant 0 value as in 0 added value. See mrweasel's comment below for more details on the second point.
Say what you will about valuations in general, but Snapchat is rare in that they've produced a physical product and set some sort of future goal in hardware (specifically cameras). So If everyone else gets a C, I'd at least give them a C+.
The last Uber I ever took was a 20 minute drive that cost me $3.75 — I had a conversation with my driver about his cut of the fare, and tipped him because I felt guilty about how absurd it had become.
Uber's recent losses are unparalleled and largely stem from driver subsidies because they aren't actually charging a sustainable fare for the service they contract.
I honestly don't think they're a real company. It's all a farce.
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.
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.
Facebook also IPOd with minimal profits, 300 million users who would never be willing to pay for the service, and hordes of VCs ready to fund their competitors. Snapchats mileage may vary, but facebook now generates lots of ad revenue.
Sure that's a reasonable opinion, one that I agree with.
> Snapchat is a fun opportunity, if the price where $10-20 million.
This is just out of touch. Show me another platform with the level of reach, engagement and usage that SnapChat has that's worth less than $5B. You realize Snap have generated $400mm in revenue last year right? I think you just have a fundamental misunderstanding of the product, the company, and their place in the market.
> 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.
There is a very very clear way of injecting ads into SnapChat and that's what they've generated the $400mm in revenue from. In fact, it's the same method that Instagram stories uses - sponsored story ads placed between organic stories amongst other media centric partnerships.
A lot of people think there will be a big shift in brand advertising away from TV and towards the internet (brand advertising is aimed at general awareness about a brand and forming positive or desirable associations with that brand in people's minds). Snapchat is very well poised to capture a lot of brand advertising money if this shift happens in the next several years. Not only do they have a large, highly-engaged user base, but also brand advertisers are often especially eager to reach younger consumers who are just beginning to form impressions of brands.
Of course, there are a lot of "if"s in all of that. But they do have a clear path to bringing in massive revenue if everything goes well.