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Comment by shrikant | Hacker News Reader

> Snapchat, the photo-messaging app raising cash at a $15 billion valuation, probably isn't actually worth more than Clorox or Campbell Soup.

Why not?

Edit: Okay, personally and intuitively, I'd value a convenient means of communication more than processed food and snacks.

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Probably because Clorox and Campbell pull in ~$5 billion and ~$8 billion in revenue and have done so for the last 5 years. Pretax earning for both are ~$1 billion.

I agree that future cash flows are more important than historical performance but a track record counts for something, right?

Would you rather invest in Campbell soup or Snapchat?

Clorox stock price 5 years ago: ~65 Clorox stock price today: ~108 Annual return: 10.7%

Campbell stock price 5 years ago: ~35 Campbell stock price today: ~45 Annual return: 5.15%

I get it, soup isn't sexy. Doesn't mean its not a good investment. Personally, I don't claim to have a preference for one or the other. Investment is more about risk profile than blind speculation.

Clorox is also paying a 2.7% dividend. Campbell is 2.8%. Would be reasonable to bump those five year annual returns up to perhaps ~13% and ~7.5% (let's assume the dividend was lower five years ago).

Chlorox is the slow-and-steady type. SnapChat is the hare, to Chlorox's tortoise.

The chances that Chlorox or Campbell will still be around in 10 years? Very high. Snapchat? Not so much.

I would invest in Campbell soup all day long. And I would gamble on Snapchat.

On the other hand, I personally think the chances that Snapchat (or its technology) will be acquired down the road are a lot higher than either Campbell or Chlorox.

Acquisition isn't necessarily a good thing for normal investors.

I'm guessing you think that because you didn't experience the dotcom era first hand. Companies that have raised huge sums of money can go under. It's not happened recently but when it does it'll be horrible to watch. I'm not suggesting that we're in a bubble either - the fact is that companies die for a bewildering variety of reasons, and it is inevitable that one or more of the unicorns will die eventually.

Well, Clorox was acquired by Procter & Gamble in 1957 and then divested. Campbell Soup in the UK was acquired in 2008. So acquisition odds are higher than you'd think.

You may think that food companies are boring, but there are a lot more acquisitions, spinoffs, and mergers of food companies than you'd think. Take a look at http://en.wikipedia.org/wiki/List_of_ConAgra_brands and consider that there are multiple acquisitions behind most of these. Kraft has gone through too many mergers, acquisitions, and takeovers to even try to explain. http://en.wikipedia.org/wiki/Kraft_Foods

Anyway, my point is that it's not just the computer industry where acquisitions are happening for billions of dollars.

Depends on the price. One would rather own a cheap Clorox than an expensive Snapchat.

Depends on the valuation. If much of the upside is already baked into Snapchat then there's a lot of downside risk (hence the downside protection that these institutional investors are demanding). I wouldn't touch Snapchat at that valuation with anything more than spec funds. I certainly wouldn't view equity comp as valuable.

I'd pick Campbell's, that 2.77% dividend yield is nothing to sneeze at when interest rates are this low.

Some are these are companies with products that produce profits and the other is a photo-sharing app that doesn't.

I can clone Snapchat in a weekend. So can couple of million other people. It's fall could be as rapid as its rise.

I cannot even begin to grasp the challenges of delivering canned soup around five continents.

Campbell solve hard problem. Snapchat - easy one.

It's amusing to see that you think that to compete with SC is as simple as copying its functionality.

It sill makes the idea that someone would pay billions (in cash) for Snapchat technology pretty funny.

As how to value their users...

It's not that it's easy, it's the barrier to entry. One person can build a potential SnapChat clone (or next big thing that ends up being hip), and have access to the same potential user/customer base.

I can sell home made soup on my front lawn, but i sure as hell can't scale to Campbells size overnight.

This is why Campbells is the safe investment.

Because Snapchat's valuation is solely based on their technology?

Snapchat had the right product with the right marketing that lead them to gaining a large user base with high engagement.

Furthermore, is Campbell's valuation based on their soup recipe? I can make chicken soup in hour. They are valuable for their brand, distribution, and production capabilities.

Snapchat success came by fraud. They lied their audience about the self destruction of their messages.

> Snapchat had the right product with the right marketing that lead them to gaining a large user base with high engagement.

You can say this of any fad. The ice bucket challenge certainly engaged millions of people, but that doesn't mean it's a brand worth investing billions.

"investors agree to grant higher valuations, which help the companies with recruitment and building credibility, in exchange for guarantees that they'll get their money back first if the company goes public or sells"

That's all she wrote- unless of course your startup actually sells something, than you might have a bottom number that still looks impressive once the initial investors have moved on.

You too can invest in my $1 million company for investing just $1000 to buy 0.001 shares.

when internet is down, snapchat will not work but clorox and campbell soup will still continue to do their job. that's why :)

Same goes for Google.

The internet will never be down again (barring the Apocalypse). Human life changed in the nineties in ways that we have not even begun to grasp.

tell that to users of Comcast

haha, downvoted due to lack of a sense of humor in the crowd.

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