Snap, formerly known as Snapchat, is making waves with news of an upcoming IPO. But the real news here is the $25 billion valuation. Is this some random number or is the company worth it? How does an IPO help propel the company’s future?
Snap Preparing for the Biggest Ipo For 2017
Snapchat, the company known for letting users send disappearing video and photo messages from their smartphone, is preparing for an IPO in March of 2017. The IPO would give Snap a valuation of $25 billion, making it the biggest company to go public on a U.S. exchange since Chinese e-commerce company Alibaba’s $168 billion launches in 2014.
Is the valuation accurate? What’s Snap’s plans moving forward?
Snapchat currently has 235 million monthly users, most of whom are in the coveted 24 and under the audience. About 70 percent of 18-24-year-old Americans with smartphones have Snapchat. And those users are active, spending on average at least 10 minutes per day on the app. For context, users spend 6.4 minutes per day on Instagram. That’s a lot of users congregating in one place, making Snapchat an appealing option for advertisers.
Snap’s ad revenue comes from sponsored content and video ads, as well as ad “lenses” which let companies pay to have a custom feature representing the brand put into popular usage. Currently, at about $350 million in revenue, Snapchat is expected to grow exponentially and bring in $2 billion by 2018. With that kind of momentum, a $25 billion valuation doesn’t seem too far off.
If the company is doing so well, why do they need an IPO?
Having public shares is very helpful to a company. Snapchat can use these public shares as recruitment and retention tools to bring in top level talent for coding, programming, marketing, and other key roles. Snapchat also gets a huge surge of cash which they can use to develop new ideas, such as their “Spectacles” hardware; glasses that record user views in first person and instantly upload to Snapchat.
Wonder how Snapchat makes money? Watch this video from Bloomberg Technology!
While Snapchat can fade out just as quickly as it surged to the forefront of social media, an IPO presents a great opportunity for investors. Keep an eye out for Snap shares to go public in March, and when they do … Buy..
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