Competition for ad dollars
Snap, the parent company of Snapchat, is preparing to go public in early 2017, according to a report from the Wall Street Journal. Taking Snap public could stir up the digital advertising market, the mainstay of Facebook (FB), Alphabet (GOOGL), Twitter (TWTR), and LinkedIn (LNKD).
Of these companies, Twitter appears to be the most frustrated, as highlighted by the company’s slow and sometimes stagnating subscriber growth. For Twitter, the threat of a publicly listed Snap goes beyond increased competition for ad revenue and extends to a battle for subscribers.
Twitter only added 4.0 million subscribers in 3Q16 to bring its total user base to 317.0 million. The media attention that Snap is set to attract as it goes public could make it even harder for Twitter to woo more users to its platform.
Snapchat is estimated to have 300 monthly users. About 150.0 million people use the app (application) daily. Facebook has 1.8 billion monthly users. Its other digital properties, WhatsApp and Messenger, have more than 1.0 billion monthly users each.
Largest IPO since Alibaba
Besides stirring up competition in the social media scene, Snap is also preparing for what could be the largest IPO (initial public offering) in the United States in recent years. The IPO could value Snap at $20.0 billion–$25.0 billion, possibly making it the most expensive US tech (technology) IPO since 2014 when Alibaba (BABA) debuted at a valuation of $168.0 billion.
Snapchat is still losing money, but its revenues have been growing rapidly. The company is expecting revenues of $250.0 million–$350.0 million in 2016, rising to $1.0 billion in 2017 as the company opens up its platform for more advertisers next year.
But Snap’s high-profile IPO could be diminished if unicorns such as Airbnb and Uber decide to plan their IPOs about the same time as Snapchat. Airbnb commands a valuation of ~$30.0 billion, while Uber is valued at ~$68.0 billion.