Snap Inc.—social media marketing tool, Snapchat’s parent company—has begun the process for making an initial public offering.
Snapchat will seek to raise as much as $4 billion in its planned initial public offering, Bloomberg reports. The IPO could value Snapchat at about $25 billion to $35 billion, though a final decision on the size of the IPO isn’t set.
The Wall Street Journal reports:
The four-year-old company, whose Snapchat app lets users send disappearing messages from their smartphones, was eligible to file its IPO paperwork confidentially because it expects to have less than $1 billion in revenue this year. Under the 2012 Jumpstart Our Business Startups Act, companies with annual revenue below $1 billion have the option to file an initial draft of their IPO prospectus with regulators and make adjustments before unveiling it publicly.
Morgan Stanley and Goldman Sachs Group Inc. would be lead underwriters of a Snap IPO, according to people familiar with the matter. Snap executives plan to be relatively conservative in pricing the offering.
For organizations that advertise on Snapchat, the move could open up additional opportunities down the road.
Here’s more from WSJ:
Snap’s main source of revenue is selling ads on Snapchat that are slotted in between stories contributed by media partners and video diaries posted by the app’s users. Marketers also can buy location-based or event-based geofilters and “lenses” that add quirky characteristics to photos and videos.
Snap has been working hard to win over Madison Avenue ahead of the IPO. Advertisers are intrigued by the Snapchat app, which reaches more than 150 million users daily, including 41 percent of 18- to 34-year-olds in the U.S.
How much is Snap worth?
Few can deny the rapid pace at which Snapchat has expanded its following. Despite that, it might be tough for marketers to gauge how much to invest.
Here’s insight from Social Media Today’s Andrew Hutchinson:
[Marketers must] assess the value of Snapchat in the context of other players in the market.
[Accelerated growth] is the crux of the case for Snapchat. On a comparative scale, Snapchat’s valuation is within the realm of logic. But on the other side of that comparison, Twitter’s currently valued at around $10 billion (down from a high of $40 billion) and Pinterest is worth $11 billion.
Does Snapchat have double the monetization potential of those platforms?
According to data from Recode, Snapchat jumped from 8 billion daily video views in February to 10 billion in May—a 25 percent rise in just three months. Although the specifics of the IPO remain under lock and key for now, it’s tough to dispute the app’s momentum.
For marketers, it’s important to note that part of Snap’s increasing video inventory comes from its publishing partnerships, which continue to expand.
Advertisers are shelling out the big bucks to reach the coveted millennial crowd and Snapchat’s revenue could total $366.7 million this year, according to a report from eMarketer. The firm expects Snapchat’s revenue to climb to nearly $1 billion in 2017.
Snapchat is reportedly looking at going public as early as the first quarter of 2017 and could set the stage for a resurgence in tech IPOs