The application registers a strong growth of its activity, but its losses exceed its total revenue.
The World | • updated | By
The phantom yellow for Snapchat is going to enter Wall Street. Thursday 2 February, the californian start-up, which changed at the end of September its name in Snap Inc, has finalized its upcoming initial public offering (IPO). The procedure was launched in November 2016, but was previously confidential, as permitted by u.s. regulations. The operation could occur at the beginning of march. As for Twitter, it will take place on the New York Stock Exchange (NYSE), and not on the Nasdaq.
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Snap is hoping to raise $ 3 billion (€2.8 billion). This amount could be adjusted according to the interest of the investors. According to the american press, the society would otherwise be a valuation that could reach $ 25 billion, It would be the largest ipo of a high-tech company american since that of Facebook in may 2012.
The prospectus filed with the Securities & Exchange Commission (SEC), constable u.s. stock exchange, highlights the recent progress made by the company in terms of monetization. But it also raises a number of questions on its ability to attract new users and to find the path of profitability.
These two elements could complicate the task of leaders of Snap, while the financial markets are becoming more demanding, particularly since the dashed hopes raised by Twitter. The reception by Wall Street to be particularly observed. In Silicon Valley, many companies hope to, in effect, that a successful operation will enable them in their turn enter the Stock market.
in The past year, Snap has achieved a turnover of 405 million dollars, or seven times more than in 2015. Its mobile application, known for its photos and videos that disappear after a few seconds, attracted a growing number of brands, by enabling them to reach a younger audience (87 % of american users are under 35) and more active than on other platforms. It also offers more creative ways to interact with their audience, such as animation and custom filters. The application has recently added new options for ad targeting, especially in relation to the centres of interest.
The ability to monetize its activity is still embryonic in the international, with only $ 49 million in revenue last year. the ” It should not be too difficult to go and seek out growth, where the company will develop its presence outside of the United States “, points out Brian Wieser, analyst at Pivotal Research. The firm eMarketer anticipates a turnover close to a billion dollars this year.
other data are much less encouraging for the Snap. To begin with, the recent slowdown in the growth of its number of followers. In the fourth quarter, the application had 158 million daily active users, just 5 million more than in the third quarter. The company wants to be reassuring : this deceleration is due to “technical problems” related to new options and updates.
But it also coincides with the repeated efforts of Facebook to counter the growth of its rival. In August, the social network has launched a new offensive through Instagram, its platform with photos and videos. It has added a new feature that allows users to create ” stories “ showing all of the photos and short videos. And that copy greatly the possibility offered by Snapchat since 2013. the ” competition is fierce “, says Brian Blau, of Gartner.
Another worrying : the very high level of losses. In 2016, Snap has incurred a deficit of $ 515 million, up from $ 373 million the previous year. In comparison, Twitter had an annual loss of $ 100 million prior to its ipo. And Facebook of the profits of a billion. In 2016, the expenses of the company have more than doubled, reaching $ 925 million. the ” This means that each user has generated costs of $ 6 and that just half was offset by advertising “, note Mr. Wieser.
In 2016, the start-up has tripled its workforce, moved to almost 1 900 employees. Its marketing costs have been multiplied by five. His efforts in research and development have doubled. And Snap comes to commit to pay at least $ 400 million per year until 2022 to Google to host its services in the cloud. the ” Even with rapid growth, it is not necessary to wait for profitability before long “, according to Jan Dawson, analyst at Jackdaw Research.
To reassure Wall Street, the company tries to reposition its business. the ” Snap is a photo “, ” she says, and not a simple e-mail application. In the longer term, it intends to diversify its sources of revenue. At the end of September, it unveiled its first electronic product : sunglasses with a small camera to film short videos. Their marketing has started in the past year in the United States. It is expected to accelerate this year. the ” It is an interesting proposal, said Mr. Blau. in But Snap has not yet unveiled its future projects “.
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