Snapchat: From 0 to 100 to 25 Billion

For a mobile application that launched in 2011, Snapchat is seemingly ubiquitous. With 158 million daily users— 43 per cent of which are based in North America, and 33 per cent of which are based in Europe— sending 2.5 billion snaps everyday, the statistics speak for themselves. Perhaps what is more impressive is that Snap Inc. was able to rise to the top of the tech-sphere among fierce competition from established giants like Facebook, Twitter, and Instagram. And yet, not so dissimilar from the humble roots of Facebook and Instagram, Snapchat was also started by a couple of college kids with a million-dollar idea.

The story behind Snapchat started with founders Evan Spiegel, Bobby Murphy and Reggie Brown when they met as students, and fraternity brothers, at Stanford. As college juniors, with the collaborative forces of Spiegel as a product design major, Brown’s idea of disappearing photos, and Murphy’s experience with coding, the initial conception of Snapchat debuted as a project for Spiegel’s design class. Soon after, the application dubbed Picaboo, which retained the original idea of sending photos that would disappear after a matter of seconds, made an appearance on the Apple store. However, despite a relatively smooth transition from concept to prototype, the rise of Snapchat has had its share of obstacles, the details of which have become transparent in the company’s recently announced official push towards an Initial Public Offering (IPO) in which company stock will be made available to the public.

Image courtesy of AdamPrzezdziek, © 2012, some rights reserved.

One of the first bumps in the road for the young founders occurred early on with a lawsuit filed in 2013 by Reggie Brown, who accused Spiegel and Murphy with taking his idea and then excluding him from the group. At the end of the confusing and drawn out legal battle, the lawsuit was finally settled with a 157.5 million dollar pay out to Brown at the end of 2016. In addition to the aforementioned complicated-turned-toxic group dynamic, the young founders of Snapchat also had to deal with hostilities emanating from Facebook. With the 2012 launch of Facebook’s app Poke, which had the exact premise of Snapchat, Zuckerberg made it clear that he meant war. When Facebook’s Poke failed to derail Snapchat, Zuckerberg offered Spiegel a 3 billion dollar cash buy out, which Spiegel proceeded to reject. More recently, former employee Anthony Pompliano filed a lawsuit against the company, claiming that Snapchat’s growth metrics were falsified in an attempt to boost its valuation. While these obstacles may point to Snapchat’s possibly shaky foundations and its brash, young administration, they also highlight Snapchat’s determination to stay afloat in the face of difficulties, which is a good sign for investors.

Thus, while the reality of an IPO might seem reasonable at present, it is jarring to realise that at the time of Zuckerberg’s buyout offer, Snapchat was generating absolutely no revenue, and had no plans for future revenue in the works. However, with the 2015 launch of Discover, a network of media channels and brands, a new era of advertising has dawned. At the touch of a button, professionally curated content, which creates a feeling of community rather than aggressive sell strategy, is streamed to millions of viewers. This feature, in addition to the addicting nature of MyStory, which allows users to create a string of moments and video, geotags, and universally recognised filters, have combined to give Snapchat a 25 billion dollar valuation. Such a valuation would not only largely surpass that of other tech firms such as Facebook, Twitter and Google, but would also go head to head with e-commerce giant Alibaba’s 2014 IPO record of 25 billion dollars. However, despite a growing demographic, international expansion, and advertising potential, Snapchat still has a lot to prove in the face of such a massive valuation. Although it is easy to be sucked into the impressive statistics that hold Snapchat in a very attractive light, Snapchat’s user growth is slowing and challenges lie ahead. With echoes of Facebook’s attempt to copy Snapchat via Poke, it is reasonable to assume a future of heavy competition for the Snap Empire.

Even more promising than Snapchat’s future is what the 25 billion dollar valuation means for the technology market as a whole. Snapchat’s attempt to go public is not only surprising in its scope, but also in the mere fact that tech companies in the recent past have preferred to rely on private funding rather than go public. As such, the biggest tech IPO ever seen could be a herald of larger ones yet to come, such as the sleeping titans of Uber and Airbnb.

Snapchat has had an impressive story thus far, from its conception to its quick rise to ubiquity. Perhaps the popularity of Snapchat stems from the fleeting, seconds-long moments that mimic the reality of our own minds, which whirl at a million miles per minute. This said, the true test of the Snapchat’s popularity will come in March 2017, when the number of shares sold will either meet the billion-dollar price tag, or fall short.

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