Snap Jumps in Debut After App Maker Raises $3.4B in IPO

https://www.bloomberg.com/news/articles/2017-03-02/snap-opens-at-24-a-share-well-above-the-17-dollar-offer-price

by rayuela • 9 years ago

263 351 9 years ago

usaphp• 9 years ago

Reminds me of Facebook IPO, a lot of people were claiming it will plunge and eventually go bankrupt. But companies with such big daily active audience that can be targeted with ads are here to stay.

jonknee7• 9 years ago

Considering it went smoothly it doesn't remind me of Facebook's IPO at all. Twitter should be all the evidence you need of how hard it is to succeed selling advertising to a big audience. Snap might crush it, but I would give them a few earnings reports before comparing them to anyone.

maxerickson4• 9 years ago

Facebook's market debut showed that Facebook did an excellent job controlling and pricing the IPO. Banks complaining -> Facebook and insiders won.

This debut just shows that Snapchat wasn't in the driver's seat. Major holders are still mega wealthy though.

DougN72• 9 years ago

Groupon was also similar if memory serves. My prediction is Snap will be the Myspace of 10 years from now.

ptrptr• 9 years ago

Especialy with such efficient ad sales people - https://mic.com/articles/170019/leaked-snapchat-emails-anti-...

monatron• 9 years ago

The Facebook IPO was a disaster and did stay below target for quite awhile post-IPO

maxerickson4• 9 years ago

It was a glowing success for Facebook!

vostok2• 9 years ago

I'm not a banker so maybe I'm missing something, but I wouldn't be too happy if my company popped after the IPO. The way I see it, that just means that I left money on the table.

If anything, this increases my respect for Zuckerberg and team.

I'm not really excited about the prospect of bankers lining their favored clients' pockets with my money.

xienze2• 9 years ago

Well the major difference between the two is that Facebook can engage grandma as well as junior. It has broad cross-generational appeal. The whole point of Snapchat is "mom and dad don't use it" which means they're beholden to the whims of a very young audience. Which I guess is good, since young people aren't known to move on to the next big thing at the drop of a hat.

brangalinafoeva2• 9 years ago

Young people don't stay young forever.

DougN72• 9 years ago

since young people aren't known to move on to the next big thing at the drop of a hat.

I'm assuming that was said with a whole lot of sarcasm? In my opinion, that will be the death of Snap - something else new and shiny will come along in a year or two and Snap will be a ghost town.

ryanmerket3• 9 years ago

> But companies with such big daily active audience that can be targeted with ads are here to stay.

That's just it. Snapchat has very little targeting data, and targeting is a force multiplier for ads revenue. They don't even have explicit gender data.

Edit: Downvote all you want. They don't ask the users for gender. It's implied. See Twitter for a similar tactic.

joshuamorton4• 9 years ago

They have extremely powerful targeting data: geolocation. Afaik, one of snap's biggest revenue sources is geolocked filters.

InternetUser6• 9 years ago

And that's not their only product:

Bitmoji has been the #1 iPhone app overall since January 11, and it was already the #1 iPhone Utility app since July 22, 2016 (Log in to see) -

https://www.appannie.com/apps/ios/app/bitmoji-keyboard-your-....

https://www.appannie.com/apps/ios/top/united-states/overall/....

And yesterday on eBay, 22 pairs of Spectacles were sold, with one pair went for $229 and 2 others went for $200 each, even though http://www.spectacles.com has been offering them for $130 since last Monday -

http://www.ebay.com/sch/i.html?LH_Complete=1&LH_Sold=1&_from....

Then there is the rumored Android Snap Phone:

http://mashable.com/2017/02/14/snapchat-phone-concept-design....

And Snap Drones, as reported on page 2 of today's NYTimes -

https://www.nytimes.com/2017/02/28/technology/snapchat-drone....

http://i.imgur.com/6Nl0Ymq.jpg

doc_holliday• 9 years ago

I know that the Snapchat platform is worth something, it has high engagement and adoption of 18-24 year old age segment, and that is worth a lot in terms of attention and advertising $s.

However, this just feels completely out of proportion to earnings and downside does not seem priced in. Willing to be proved wrong of course, but especially seeing as they are non voting shares, I cannot understand this pricing.

empath75• 9 years ago

FOMO. And the market is really frothy in general right now.

komali26• 9 years ago

For some reason whenever people use the word "frothy" to describe something, I gag slightly.

michaelbuckbee2• 9 years ago

The hard part with these things is that in some ways progress and growth is non-linear. So Snap has (by all accounts) done a masterful job of launching their first hardware product:

https://www.spectacles.com/

How do you value that? I'm of the opinion that AR style glasses are the technology that will be the next tech wave post mobile phones (FB buying Oculus and Google pushing so much money on MagicLeap is explained for a similar reason).

So how do you consider Snap's Spectacles? Say there's a 10% chance that they become the initial dominant hardware player in the post-phone mobile space? What's that worth?

elsewhen3• 9 years ago

spectacles are record-only at the moment without any viewing for the wearer. adding user-viewing is at least one order of magnitude more difficult than the current device. is there any evidence that spectacles will be transitioned into AR?

tln• 9 years ago

spectacles aren't AR... do you think they will move that way?

If snaps taken with spectacles ever make up more than a % or two of snaps, I will be surprised.

idiot_stick2• 9 years ago

How do you value that?

It's a pair of glasses that stream video from a camera. I'm not saying it's not cool, but what is so crazy about it that it's hard to value?

What's that worth?

If you're buying IPO shares and can't answer that question yourself, you're probably doing something wrong.

moolcool9• 9 years ago

These cheap plastic glasses have the cultural staying power of the pet rock.

jonknee7• 9 years ago

No disrespect to Spectacles, but camera glasses have been around for years. It's not AR and it's not yet even material to Snap's business (according to Snap!).

InternetUser6• 9 years ago

And that's not their only product:

Bitmoji has been the #1 iPhone app overall since January 11, and it was already the #1 iPhone Utility app since July 22, 2016 (Log in to see) -

https://www.appannie.com/apps/ios/app/bitmoji-keyboard-your-...

https://www.appannie.com/apps/ios/top/united-states/overall/...

http://www.ebay.com/sch/i.html?LH_Complete=1&LH_Sold=1&_from...

Then there is the rumored Android Snap Phone:

http://mashable.com/2017/02/14/snapchat-phone-concept-design...

And Snap Drones, as reported on page 2 of today's NYTimes -

https://www.nytimes.com/2017/02/28/technology/snapchat-drone...

http://i.imgur.com/6Nl0Ymq.jpg

moolcool9• 9 years ago

Remember the phone made by HTC and Facebook? https://en.wikipedia.org/wiki/HTC_First

vadym909• 9 years ago

Trend moving from So(cial)-Lo(cal)-Mo(bile) to AI-AR-Dr(one)-SDR(self driving)

giarc3• 9 years ago

Regarding the Spectacles. They only fetch those prices due to scarcity. If Snap made them available to a more wider audience, people wouldn't be buying them on eBay.

angryasian4• 9 years ago

to me this all sounds like a company with little revenue and no focus and too much money that they are just trying everything to see what sticks to get them to bigger revenue

tedmiston4• 9 years ago

And yesterday on eBay, 22 pairs of Spectacles were sold, with one pair went for $229 and 2 others went for $200 each...

Snapchat isn't making any additional money from the Spectacles resellers though.

sgnl2• 9 years ago

"snap to try on" feature is, i feel, a huge hint on how they might monetize further with another company's product

Stanleyc23• 9 years ago

for the majority of would-be shareholders is non-voting shares really that big of a problem, genuinely curious? Even if the votes:shares were 1:1 wouldn't you need a huge percentage (like > 10%) to be an influencer? If I as an 'average Joe' were to personally put down a comparatively minuscule $25k on SNAP would those votes count for much when push comes to shove?

pibefision• 9 years ago

Reminds me of Twitter IPO... just wait.

moolcool9• 9 years ago

I think this will be worse. Snapchat isn't nearly as culturally sticky as Twitter. Sites like Twitter, Instagram, and Facebook have a robust friend/follower system, and users have a huge backlog of things they contributed to the platforms. No contributions on Snapchat last more than a single day, so what is motivating users to stay on the platform instead of using Facebook or Instagram's offerings? Their friends lists exist both of those places too. In 10 years we'll look back on Snapchat as a flash in the pan.

briantmaurer• 9 years ago

This isn't entirely true – Snapchat already has features that let you save content permanently.

jeffbax• 9 years ago

I think Snap has potential to be huge… anything that wins the race to replace TV is going to be big. Whether they can do it before FB clones them/leverages their network is a big open question.

That said, despite the fact that I love Twitter more than any other network, almost none of my friends use it maybe ~a dozen people I know closely in real life still post to it. Almost all of my friends use Snapchat and complain about my lack of engagement with it.

Anecdotal, but I don't think they are comparable… additionally if your (likely closer nit group of vs. FB's "everyone you know") friends aren't posting, brands are putting up a TON that people seem to really like.

chrishn• 9 years ago

Snapchat has Memories... /s

onion2k• 9 years ago

I wonder how much of this is investors with a good understanding of Snap's potential buying because they feel it's a good gamble versus stock market investors not having many opportunities to invest in tech startups because there's so few IPOs.

chollida12• 9 years ago

I'm happy for the NYSE that this went well. SNAP has done some pretty large volume so far with no problems.

Interestingly enough, well atleast to someone who cares about the cash equity markets, the NYSE actually did a test run last week to try and simulate the chaos that occurs during any hot IPO.

So now we know that there is atleast some appetite for shares with no controlling interest and no indication of paying out a dividend any time soon. A current market cap of 30 Billion is a pretty darn big accomplishment!

Two big dates in the future to look out for.......

1) July 30 when the first lockup date is over. I'm not sure how many shares come off restriction.

2) May 15 when they do their first earnings report.

I'm interested to see if they try and make people view the company via GAAP accounting(PnL) or non GAAP measures like engagement, monthly users, etc.

gregshap2• 9 years ago

GAAP vs non GAAP accounting refers to how you calculate PnL, not whether you use things unrelated to accounting to hint that you are growing and might make money in the future. You can definitely use strict GAAP accounting and also brag that users are super duper engaged.

chollida12• 9 years ago

I think you are being more than a bit pedantic for very little benefit.

I never said "Non Gaap accounting", I said "Non Gaap measures".

That doesn't have to mean Pnl, it can, and was intended, to mean things like user engagement numbers, monthly uniques, etc.

Is there a different terminology that you would prefer that I use?

how about this........

I'm interested in seeing whether they focus on their earnings vs user growth numbers. Would this satisfy you?

pm903• 9 years ago

So now we know that there is atleast some appetite for shares with no controlling interest and no indication of paying out a dividend any time soon. A current market cap of 30 Billion is a pretty darn big accomplishment!

This is really disturbing. I don't know if its an indicator of too much money in the market, or just the fact that the market itself has expanded so much. Why would investors be OK with losing power?

trjordan2• 9 years ago

For the same reason 50% of the US didn't vote in the last election. Or employees don't demand to view board decks.

Most investors are buying as a way to make money off of continued success. They don't want to control the business or make decisions, and even if they did, they don't want to invest enough to make a dent in the normal 1-share-1-vote sort of model. They're looking the company and hooking their accounts to its success. In the public markets, most investors aren't in it for the control, they're in it for the returns.

ianstormtaylor• 9 years ago

(Disclaimer: I know nothing.)

One of the things that I personally believe is that when a company IPOs their priorities become heavily skewed towards profit and earnings, often over a short term period, above all else. And I think that hurts them.

I'm not sure that removing the voting rights of stockholders completely eliminates that pressure—it's probably also rooted in having to be on earnings calls, and the price fluctuations of bad earnings calls, etc.—but remove those voting rights might help to eliminate some of the negative, short-term-profit-seeking pressure.

If it does, it seems reasonable for some investors to want to invest in companies that aren't as worried about voting rights takeovers.

ProAm• 9 years ago

Profit? Investors want a return, they don't really care about power (more or less). If you can get 10% over 3-5 years who cares.

jmharvey• 9 years ago

It could be an indicator that a lot of people invest without regard for foundational questions like "does this valuation make sense" or "does my ownership interest grant me any control of the company?"

And I'll be the first to raise my hand on that front. On the face of it, I'm not really interested in owning a stock like this. But I've stopped picking stocks entirely, now I just invest in the stock market through index funds. And there are a lot of people like me -- enough that Vanguard funds own about 5% of just about every public company you can name. People like me are essentially saying, "We don't really care what this company does, how much it costs, or whether its stock can vote, we want to own 5% of it." (And that's just Vanguard -- there are plenty of other passive funds out there, too.)

In an IPO that sells 10 or 15% of the company, these "buy at any price" investors can eat up a pretty big chunk of the available shares. So all it takes is a few investors to say, "yes, we want to buy at this valuation," and the rest of us will blindly follow.

brentm• 9 years ago

Why would investors be OK with losing power?

Everything is ok while everything is ok.

If the company was to run into trouble these restrictions would probably be another reason (in addition to the performance) for large investors to avoid the company. Long term it remains to be seen if this will matter or not but my guess is that as long as it is sailing high many won't care.

bjacokes• 9 years ago

Note that Google and Facebook have effectively the same level of founder control, albeit with different implementation details. Google even had to issue a new share class in 2014 so that the company could issue more shares without the founders giving up voting control. Snap's approach seems like a more robust long-term way of telling investors that they don't have a say in things.

prostoalex4• 9 years ago

A single share of stock has historically bundled a few things:

1) A right to a pro-rata dividend

2) A right to vote on board, current executives, and strategic matters

3) A right to a pro-rata share of proceeds in case of a liquidity event, be it acquisition or a bankruptcy sale

It seems that current Snap shares come with (3) and only (3), so my guess would be that those investors are betting on growth and nothing but growth.

Price difference between GOOG and GOOGL provides some empirical insight into the value of a voting vs non-voting share.

ChuckMcM5• 9 years ago

They had a pretty large participating contribution (50M shares as I recall) so that is a bunch of money that paid off some folks who might have been skittish.

I was surprised to see as large a bounce as there was. And it has no doubt realigned the world view of a bunch of Snapchat employees[1].

To your last point I can't imagine they are going to talk earnings in a GAAP context unless they are generating lots of free cash flow as Google does.

[1] If you're an employee and reading this and thinking "I'm rich! Quick go buy a Lamborghini!" I caution you to wait until you've not only exercised the shares and paid tax on them, but you have sold the shares and that sale has 'settled' and you have the money in your brokerage account.

econner8• 9 years ago

They had a pretty large participating contribution (50M shares as I recall) so that is a bunch of money that paid off some folks who might have been skittish.

Could you explain what this means a little more? What is a participating contribution in this context? Are these shares employees were able to sell in the IPO?

hugs3• 9 years ago

Yup, solid advice re: waiting. Generally, I've heard it as "don't do anything drastic with the money for a year". That gives enough time to let the emotions cool down.

username223• 9 years ago

So now we know that there is atleast some appetite for shares with no controlling interest and no indication of paying out a dividend any time soon.

Not to mention their $500 million net loss last year. There are cheaper cash incinerators.

I'm interested to see if they try and make people view the company via GAAP accounting(PnL) or non GAAP measures like engagement, monthly users, etc.

There's no doubt in my mind -- they'll pull some social flim-flam for as long as they can. The whole thing is just nuts. No one's going to buy them now, and their pivot to becoming a "camera company" has yielded an even uglier version of Google Glass.

Man, this surveillance economy bubble feels so close to bursting...

krallja• 9 years ago

So, would you call this a Snap pop?

sgwealti• 9 years ago

I'm a light snapchat user (send/receive ~100 snaps/week and post to my story every 3-4 days) and I have a question about its value as an advertising platform. I always skip the ads, and I don't know anyone else who uses snapchat who does't immediately skip the ads. When I do this, is it counted as an impression? I can't imagine advertisers would be happy to know that the ads can be skipped. Also I never use the Discover page and I don't know anyone who does. Yes, I'm one person and this is an anecdote but hopefully advertisers are getting valid engagement metrics.

cspags• 9 years ago

I've wondered this as well, but my guess is that they'll go the Youtube route and make the ads less and less skippable over time.

Emc2fma• 9 years ago

From what I remember, those ads make up a small % of their revenue. Most of it is sponsored content, discovery channels, etc.

ehsankia2• 9 years ago

I know people who look at the discover section daily and read through all those articles in there...

Kiro• 9 years ago

Also I never use the Discover page and I don't know anyone who does.

I do all the time. Equally anecdotal but still.

tannerc• 9 years ago

If they're treating ad views the same as regular story views, it's once the ad is initially loaded[1].

But, as others have mentioned, Snapchat appears to be more interested in sponsored content and Discovery features.

1. https://blog.bufferapp.com/social-video-metrics

giarc3• 9 years ago

I imagine it would be similar to Youtube's model.

A view is counted when someone watches 30 seconds of your video ad (or the duration if it's shorter than 30 seconds) or interacts with the ad, whichever comes first.

https://support.google.com/adwords/answer/2472735

dingo_bat2• 9 years ago

Does skipping the ad count as interacting with it?

linuxkerneldev• 9 years ago

This $27.8 billion dollar valuation tells me that somewhere along the line, my job and lifestyle have caused me to detach from a significant chunk of society. I've never used Snap or their platform. I don't even really know what the benefit of their service. I am curious if I'm in the minority or if there's lots of developers like me who aren't able to comprehend these valuations.

godzillabrennus• 9 years ago

You are definitely not alone. The Snap product has been geared toward younger people as Facebook once positioned itself. Investors are betting that once the product and audience mature there will be huge payouts like they saw with Facebook.

There is a big risk here though. Twitter has crashed and burned when compared to Facebook.

jmathai• 9 years ago

I think it's worth noting that Twitter essentially lost to Facebook. Facebook's dominance pigeonholed and limited what Twitter could evolve to. And I'm not sure there's room for more than a couple social networks.

I don't see who SnapChat will lose to besides themselves (i.e. monetization). IMO Facebook/Instagram isn't well positioned win today's 13-25 demographic.

The point is, someone will win. And right now I'm not sure who else is in the running.

elsewhen3• 9 years ago

the fact that you havent used snap doesnt really speak to their valuation. here are some large cap (+$200B) U.S. companies that i have never used: jpmorgan chase, wells fargo, at&t, bank of america, pfizer, verizon.

joshuamorton4• 9 years ago

Right but I think that most people have used a bank, telphony company, or prescription drugs in the past.

OTOH, depending on how loosely or tightly you define what snapchat is ("ephemeral image communication platform", "image communication platform", "communication platform", "social media", "news aggregator"), there are huge groups of people that have never used snapchat or any competing products. There are lots of people in the US who have never used snapchat, instagram (stories), whatsapp, or even facebook messenger (the app specifically), which are the closest comparisons to snapchat. I think that's the point.

jotux• 9 years ago

here are some large cap (+$200B) U.S. companies that i have never used: jpmorgan chase, wells fargo, at&t, bank of america, pfizer, verizon.

But you probably have used those companies without knowing. You've probably traveled through an area with cell towers owned and operated by att and verizon. You've maybe received financing on a purchases or had financial services through a smaller bank in some way aided by chase/wells fargo/bofa. And you've never used any of pfizers commercial products? How about advil, chapstick, dimetapp, or robitussin?

leesalminen• 9 years ago

You've never taken a drug manufactured or discovered by Pfizer? That seems unlikely.

zitterbewegung• 9 years ago

I think it more speaks to that the parent comment doesn't understand the product and why you should use it (I am with the parent comment I don't understand snapchat).

ryanSrich2• 9 years ago

You use those companies, you just don't directly use those companies. Snapchat is entirely different.

InternetUser6• 9 years ago

my job and lifestyle have caused me to detach from a significant chunk of society

Yeah, the 13-21-year-old chunk of society. Do you, as a Linux Kernel Developer, happen to be within that demographic? Even their IPO roadshow video (which I see has now been removed) talks about their "13-34-year-old" user base, and then emphasizes the far higher levels of engagement and far higher potential among the lower half of that range.

Grue3• 9 years ago

Yeah, the 13-21-year-old chunk of society

MySpace had that one nailed, and look how that turned out for them. This is exactly the kind of demographic that is susceptible to fads and keeps leaving dead services in its wake.

missing8• 9 years ago

Sure the bulk of their users are young, but several of the people I follow are betweeen 28 and 45.

It's not like Snapchat is an esoteric thing. Using it can be a function of how outgoing and expressive you are. Or if you have some purpose.

The same reason you post on Hacker News is why people post on Snapchat -- to interact with others.

josu• 9 years ago

"society" as in US population. Snapchat is also used outside of the US but it's not so prevalent.

morgante2• 9 years ago

Heck, I'm 24 and have a lot of trouble understanding the appeal of Snapchat. Despite lots of friends trying to get me to use it I've never figured out how to get value from it.

nihonde2• 9 years ago

Since you said "society", it's worth noting that Snap is really not a player in Asia. In Japan and Korea, Line is dominant. In China, there is doubtless something else to take its place.

untog2• 9 years ago

my job and lifestyle have caused me to detach from a significant chunk of society

For the vast majority of Silicon Valley, this happened a long time ago. Tech valuations have been divorced from the lives people lead for quite a long time - Snap is just the first instance of this happening to people who are in the Valley, solely because of their age.

paulddraper• 9 years ago

I feel the same way.

Though I do have to remember there's a big world beyond me. John Deere has $65 billion EV. I've never use one of their products.

briandear2• 9 years ago

However, if you've eaten food in the United States, John Deere likely had something to do with it. It's just further up the supply chain. However your point is still well taken.

avenoir• 9 years ago

While i'm generally in the same boat with you, i do have a couple of 30+ friends who use Snapchat. That's a couple more than Twitter. I personally don't know a single person who uses Twitter, regardless of whether they're in tech or not, which paints a slightly different perspective on the whole Snapchat phenomena for me. I also want to point out that the possibilities of what Snapchat can become scares the shit out of me. They have the largest database of people's faces and they can do a lot of things with it.

ryanSrich2• 9 years ago

I can't tell you how much this blows my mind. So no, you're not alone. I consider myself a pretty normal person, one that can have an open mind and get along with people. I can't for the life of me figure out why snapchat is so popular. I also can't figure out how to use the app or what it's use case is over Instagram (an app I use heavily). I'm 27 by the way.

brandon2722• 9 years ago

It's funny, because I find the app thoroughly confusing to use and understand. I initially blamed myself for being dumb or not giving it enough of a chance, but when I asked a few of my friends who do use it, they kind of just shrug their shoulders and can't really explain how it works either.

mwambua• 9 years ago

You're not alone. I'm 24 and only had it installed for a day or two before I gave up on it.

Maybe I'm the type of person who doesn't need a constant glimpse at other people's lives... or maybe I already had Facebook and Instagram for that. It's likely that the same inertia will help Snap hold onto its older user-base as it matures.

ChuckMcM5• 9 years ago

I've got really bad news for you, every month older you get the more likely you are to experience this. And the next thing you know you'll be tuning through available radio stations and find that you can't find a station with music you like on it :-) Just don't succumb to EOG[1] :-)

[1] https://www.youtube.com/watch?v=bewKPi9gdT4

TillE• 9 years ago

Radio is dead, grampa.

Seriously, outside of top 40 and hip-hop stations, I think nearly everything is geared towards older people.

cookiecaper• 9 years ago

I started using Snapchat after they added their dynamic filters. My kids, aged 2-7, think it's hilarious to have their faces warped or overlaid with funny images. My wife and I mostly take videos of them giggling while their face has puppy ears and then send it to each other and/or their grandparents.

pesfandiar• 9 years ago

I've seen older people (30+) use it to share trivial moments of their lives to people who don't live with/near them. The barrier to sending a disposable short moment is a lot lower than having a video chat or sending a permanent video file, so there's definitely utility to it.

sjg007• 9 years ago

Good feature for Facebook to adopt in their app. Even though you can save the photo and upload it.

ashark2• 9 years ago

The two single guys in my circle of friends use it for the kinds of communication you wouldn't want to occur in the same app where your relatives are (say, Facebook/Whatsapp). One of them's outside the app's usual age demo but is definitely around them enough that it's a very valuable app for him (network effects—everyone at any given bar has it and you'll have much greater success connecting with them over Snapchat than anything else).

I don't know anyone else who uses it, but the rest of us are boring married people who don't go to bars much (and not for the same reasons if we do). A couple of the marketing guys at work send stuff out on it for the company, I gather, which is really weird to me since my impression is that it's (still) mostly used for sending clips of drunken stupidity and nude pics or hookup arrangements. They definitely don't use it to message grandma—that's what Facebook is for.

hindsightbias2• 9 years ago

Not snap, but maybe applicable in the same domain - know a single 30 year old who has much more success on Instagram than Tinder.

He's handy with a camera, so lots of content, introspective comments, tripod pics of his profile while staring out at the sea or what not...

Every new follower brings him a couple more.

vecter5• 9 years ago

The vast vast vast majority of snaps are not nudes or drunken debauchery. Most of them are just mundane moments of life: I saw a building while walking down the street, or, here's my lunch.

Snapchat is useful and popular because it is a way for people to say hi to their friends without having anything to say. You just take a selfie with a filter, make a face, and you're done. This lets you feel close to your friends without having the pressure of actually having a conversation topic.

The genius of Snapchat is that because photos are ephemeral, the bar to create content is as low as it gets, which results in orders of magnitudes of more content creation and sharing compared to platforms like Instagram. On Instagram, you spend all of your time obsessing over the perfectly angled and filtered photo, hoping to get as many likes as possible. As a result, you'll post on Instagram once a week, but you'll post 5 times a day to snapchat. That's a two-orders magnitude of difference in usage, which is why Snapchat is so successful.

hindsightbias2• 9 years ago

If you have no need for integrated texting/flirting/sexting/following, it's not of benefit right now.

Microsoft paid something like $40/user for hotmail, and IDK what for LinkedIn (20B?). What other platform will these kids move to? Maybe Instagram, but that leaves two big, well-funded players with ~500M users down the road. Billions to create/integrate with media/virtual content.

Unless something supplants snap for the tweens, I think they've got a lot of long-term capture. Their "phones" are their universe.

brandon2722• 9 years ago

Instagram's new stories feature seems popular and is more pleasant to use than Snapchat.

rubicon332• 9 years ago

You are not alone.

I have been struck with amazement at the rise of apps like Snap, Twitter, and Instragram. They have captivated an entire generation, leaving me on the sideline. As a developer, I suppose I'm not the most social being on the planet, but it does concern me that I have become "detached" from everyone else.

I spoke with an Uber driver the other day whos 14 year old son has 700,000 instragram followers and is making money selling advertising to big brands like Target. I'm not old, but that sure as hell made me feel old...

ashark2• 9 years ago

Welcome to the future. The economy's mostly driven by incredibly invasive advertising, normalized spyware, and kids sending each other naked pics. It's far worse than any 80s film ever imagined.

da023• 9 years ago

How does he sell the advertising? Product placement in the photos?

(I'm not interested in advertising. I'm just curious.) I'm surprised by Target: Why not rotate their product lines and improve selection rather than just advertise to teens? Most of them would probably go to Walmart where it's cheaper.

eldavido3• 9 years ago

I think there's a socioeconomic side of this that isn't discussed enough.

I have a highly engaging, challenging job that pays well. I'm a holder of an advanced degree, regularly read long-form books, and am engaged and will be married soon.

Frankly I think I'm pretty typical a lot of people on HN, and developers in general. I don't consume much media, though. I entirely checked out from facebook and haven't looked back.

When I think about who the heaviest users of facebook and snapchat are, I think of people who have boring jobs that don't require their full attention: working retail in a mall, gym attendants, hotel workers, basically anyone working a minimum wage, customer-facing job with a lot of time to kill. These people tend to be young, but they also tend to be less educated and not earn that much.

Looking at my own life, I remember thinking how backward the rich were when I was young, they were late to the internet and some still don't even use email (I think Buffett does this?) It's ironic that as developers have risen in prominence and income, we may be excluding ourselves from using the very mass-market products we ourselves create. It's weird. Are we drug dealers?

kgwgk• 9 years ago

Don't worry, most of the people buying today don't know what they are buying either...

rokhayakebe• 9 years ago

Valuation are not very meaningful pre-IPO I suppose because there are a lot of downside. So you can invest $1M at a $1B valuation, sell the company for $30M and still come out with $XX millions.

I guess the same is not true for the average person who buys into a public company. Because if you buy at $1 and tomorrow it is worth $.32c I do not see how you will not loose money.

xutopia• 9 years ago

That valuation is predicated on the assumption that the younger generation that uses the service will continue to use it in their 30s.

prostoalex4• 9 years ago

I'd recommend Tim Wu's "The Attention Merchants: The Epic Scramble to Get Inside Our Heads" for broader understanding.

The only valuable currency of the information economy is human attention, and those who harvest it most efficiently tend to command higher prices while re-selling it to advertisers, who all vie for a piece of it.

In this sense Snap, Facebook, television networks, books, Netflix, newspapers, churches, 9gag, radio stations, PlayStation Network, billboards, blogs, professional sports leagues and magazines all compete for the same currency and those who accummulate the most get to name their price.

retube2• 9 years ago

Yeah.... you know I bet there's a lot of 30bn companies out there you've never heard of, or have never used their products. Society is BIG, 7bn people in the world.

zach4174• 9 years ago

I don't understand how the existence of Snap adds over $30B of utility to the economy.

capkutay• 9 years ago

I don't understand how the existence of [any company ever] adds over [their current valuation] of utility to the economy; furthermore, if [company] fell of the face of the earth, everyone would just switch to [their competitor], and life would resume ut fit. Peter Thiel's quote should be updated: We wanted flying cars, instead we got 1̶4̶0̶ ̶c̶h̶a̶r̶a̶c̶t̶e̶r̶s [trivialization of product's value].

These comments surface every time a company goes public. You may have some valuable information driving this viewpoint underneath, but from this comment it just sounds like useless trolling.

To me at least, Snap seems like a good company with cultish user-base. They have done a good job integrating ads and rich content (some paid content) into their core UX. A difficult feat which Twitter still hasn't solved to this day. They also have an interesting perspective on live events that even FB/Instagram has failed to replicate.

zach4174• 9 years ago

I had removed the last part from the comment as to seem less trollish, so please forgive me for coming across as such. Anyway, since you asked, here is my formalized argument: (1) [falsifiable axiom] You cannot have meaningful economic growth without technological innovation. Technological innovation is improving the efficiency of existing resources or increasing the availability of resources as compared to previous eras (colloquially, "doing more with less"). (2) [falsifiable axiom] Historically, only the most valuable companies of a given era are technologically innovative. (3) [falsifiable axiom] Under the current valuation, Snap Inc. is currently one of the most valuable companies. (4) [falsifiable axiom] Snap Inc. is not technologically innovative. (5) [logical conclusion given axioms] Snap Inc. should not be valued as one of the most valuable companies of this era.

zach4174• 9 years ago

Furthermore, your comment is no defense of Snap Inc's valuation, either. In my humble opinion, "integrating ads and rich content into their core UX" and "an interesting perspective on live events" are not strong arguments for why a company should be worth $30B.

soundwave106• 9 years ago

Personally, I wouldn't put too much "trust" in the market cap number. A lot of times at this stage, the investing is rather speculative. We will find out what the market really thinks in a few months.

I imagine people are probably buying the stock in the hopes that this is the next Facebook (which is now roughly 4x the initial day end trade price). There's also, however, the possibility that this might be the next Groupon IPO equivalent (initial market cap at the close: 16.5 billion; current market cap: 2.34 billion, about 20% of the initial opening day price). We'll see.

InternetUser6• 9 years ago

The stock is now showing up online:

http://finance.yahoo.com/quote/SNAP

http://www.nasdaq.com/symbol/snap

Not on Google Finance yet:

https://www.google.com/finance?q=NYSE:SNAP

paglia_s• 9 years ago

As an user in their target age (18-24) I have to say that since Instagram started introducing features like stories and stickers the activity in my Snapchat has diminished enormously. I would say 50-70% less activity.

I don't know if it's something specific to my social circle or more widespread but anyway it's been impressive

edoceo• 9 years ago

Your case matches with the three people ("melinials") I know who have used Snapchat.

hueving2• 9 years ago

Millennials actually covers much more than that and someone who is 18 now would likely not even be considered a Millennial. If you parent was a baby boomer, then you are a Millennial.

https://en.wikipedia.org/wiki/Millennials

Kratisto• 9 years ago

Both my coworker and I are in the (23-26) range. All my friends (new city, college, and home) all use Snap religiously. All of her friends use Instagram. I think it's just hit or miss depending on the groups. A lot of my friends use Instagram as well. However, not for the story aspect.

kilroy1232• 9 years ago

Plus facebook just rolled out the same feature on WhatsApp. Which has, what, 1 billion active users as well?

Facebook is going full-throttle trying to compete against snap.

adventured2• 9 years ago

It's extremely clear that Facebook is setting itself up for an anti-trust action in the next few years. Their very aggressive leveraging of their near-monopoly in social to try to kill Snapchat, will be viewed in hindsight similar to Microsoft attacking Netscape with its OS position. If Facebook succeeds, it'll leave them with an overwhelming monopoly in social, there's no scenario under which they won't be pursued by the government thereafter. Plus, you can bet Snapchat and its investors will begin to howl loudly the harder Facebook presses.

Zuckerberg's lust for market domination, will unravel or stagnate his kingdom if he's not very careful. His behavior at this point is looking ever more Gates-like when it comes to trying to knock-off the competition while possessing a near-monopoly (you can do one or the other, but if you're a $400b company and you try to both kill all your competition while having such a position, good luck).

aphextron• 9 years ago

This is going to open the floodgates for so many smaller startups that have been waiting to IPO. 2017 is going to be an exciting year for anyone with equity.

zachgersh• 9 years ago

My favorite tweet about the whole situation: https://twitter.com/objective_neo/status/736530568222015489

theparanoid• 9 years ago

High tech has become more marketing and less tech.

komali26• 9 years ago

Considering the state of the snapchat app on android, I absolutely agree.

donovanm• 9 years ago

The amount it's valued at seriously blows my mind. Like this is an app that's main features are sending 10 second videos and images.

slackoverflower2• 9 years ago

Complexity does not correlate to value. All my friends use Snapchat and no one uses Facebook.

Apocryphon6• 9 years ago

Maybe the future is in these over-glorified social media lifestyle companies acquiring or bailing out "worthy" startups working on "hard problems". Sort of like how ad-funded Google is investing in health longevity research and the like.

The future is going to be funded from the largesse of dumb app companies, because the public would rather fund dumb app companies than rocket ship firms.

vecter5• 9 years ago

That or because it's more profitable to do so, especially on a risk-adjusted basis? What's with the negativity around funding apps if they create tangible value? What makes them "dumb"?

If you believe there's some amazing untapped opportunity in funding rocket ship companies, then perhaps you should raise some money from LPs and invest in rocket ship companies.

overcast• 9 years ago

That was my sentiment five years ago for Instagram.

9 Apr 2012

2008:Sun buys MySQL for $1B. 2012:Facebook buys Instagram for $1B. DB tech running half the web+revenue vs hipster photo filter app+no rev.

Apocryphon6• 9 years ago

To be fair, you didn't take into account the difference that $1B was worth between those times. Not just inflation, but the economic situation in 2008 as well.

fullshark2• 9 years ago

I saw pretty easily how Instagram could be worth a billion to FB, who has a social network and wants to expand their user base / stop competition from rising.

I don't understand how these shares that pay no dividend and give no voting power are worth $24 each. They are basically "SnapChat Fun Bucks." Anyone buying it just hoping another person down the line will pay more for it. On top of that, we know there's a large number of people holding it (employees) that are going to start selling their shares over the next year.

I just don't get how this has any value at all.

dovin2• 9 years ago

Interesting. Bitcoin is trading at an all-time high today. I guess the fears of a tech bubble collapse have been staved off for a little while, at least.

paulpauper2• 9 years ago

People have been predicting bubble and collapse since 2012...stopped clock theory

dovin2• 9 years ago

Of course, but it still is a good idea to think critically about the possibility that tech companies are seriously overvalued. The chance of a bubble bursting in any given year are probably low, but that there will be a downturn is inevitable. And when that does happen I'll want to be paying attention so I can see it coming as far out as possible.

mring33621• 9 years ago

I think it's generally appropriate to view events like this SNAP IPO as loudly hyped introductions of new vehicles for financial speculation.

SNAP is a shiny new toy for traders and market-makers.

We won't know how the public market truly values SNAP until, IMHO, maybe 12-24 months from now.

Symmetry• 9 years ago

Ouch, so they collect $1.4 billion less than they could have if they're priced their stock higher.

probe3• 9 years ago

The SNAP thesis I like the best is - "Twitter-like growth with FB ARPU".

The monetization potential of this company is massive (geofilters, sponsored content, hardware with spectacles, etc.) and there's no direct comp for that. Pokemon Go showed us the bleeding of digital to physical, and Snap has the potential to be the first company to unlock value from it (ex. geofilters). Plus you can view SNAP as a call option on AR and their potential to be the main camera (when something exciting happens, which app do you open first? For at least in my social circle its by far Snapchat not the Camera app/twitter/etc).

That being said, they face a massive threat from Instagram Stories and now WhatsApp Stories. Though a caveat - while their DAU growth has slowed, it's actually been in international markets primarily (and I think wrongly they don't care enough about dealing with low-bandwith, "unexciting" users). If they can keep a healthy growth in US to escape the FB threat they can afford to lose internationally.

Their first 1-2 earning report will be very revealing for SNAP b/c the expectations have been set and I'm looking for them to do the following: 1) Raise ARPU at similar rates 2) Maintain healthy DAU growth in the US 3) Create new product innovation around AR/Spectacles/Lenses.

If they don't hit at least one of those goals (and preferably two or all three), than I would be very concerned for them.

moolcool9• 9 years ago

Pokemon Go showed us the bleeding of digital to physical

It also showed how quickly a popular phenomenon can loose cultural relevance.

when something exciting happens, which app do you open first? One that doesn't automatically delete the photo I took of the exciting thing by default

probe3• 9 years ago

I'd argue it was poor/slow execution that led Pokemon Go to lose cultural relevance. If they had introduced more pokemon, ability to trade/battle, etc. they would still be highly relevant and a behemoth today.

When I post to Stories I also post to "Memories" so everything is saved on the app. Plus I usually go back to snapchat and save pictures from my story manually if I want to have it saved locally. Most people I know do the same.

funnyfacts365• 9 years ago

I would also say a camera that uses it's full resolution to take the photo instead of just taking a screenshot... For a camera company, they sure do have a shitty camera/product

anonu• 9 years ago

I like the thesis summary. Let's be honest WhatsApp "Status" is terrible. I've checked it daily since I got it on my phone and have only seen 1 person post on it. Instagram Stories is just OK. Snapchat has, so far, cornered the market in this particular "storytelling" niche.

There's also a more natural integration with how ads are injected into the experience. Snap works carefully with ad buyers to make sure that the ads are engaging and flow with the rest of the product. That's an important differentiator.

angryasian4• 9 years ago

I don't buy that sponsored content or hardware are that exciting in terms of monetization potential. Geofilters are interesting new ad product, but as an ad product they are not really that exciting as you lose virality(ephemeral) and sharing. They are limited to your immediate social network.

it's actually been in international markets primarily

I'd like to know where you read this. I'd still be concerned because they've pretty much saturated the millenial market at this point. They need to grow in other demographics or internationally.

probe3• 9 years ago

My bad, when I say geofilters I mean filters in a broader sense (like the Taco Bell filter which was viewed 224 million times)[1].

You can see the international DAU numbers in the S-1, but TC had a good summary and graphs: https://techcrunch.com/2017/02/02/snap-s1-numbers/

[1] http://www.adweek.com/digital/taco-bells-cinco-de-mayo-snapc...

jonknee7• 9 years ago

"Twitter-like growth with FB ARPU"

Isn't Twitter's big problem that they stopped growing? Much like Snap it appears if the most recent trend holds.

TWTR had 231m MAU at the time of its IPO compared to 313m currently (3.5 years later). They hit a roadblock at the end of 2014 and have not recovered.

https://www.statista.com/statistics/282087/number-of-monthly...

Compare that with Facebook who despite covering a meaningful percentage of humans is still growing:

https://www.statista.com/statistics/264810/number-of-monthly...

The multi-billion dollar question is which path Snap takes...

squeaky-clean2• 9 years ago

Pokemon Go showed us the bleeding of digital to physical

Niantic had another game (Ingress) that Pokemon Go is pretty much a copy-paste of. Compared to P:GO, Ingress was/is not very successful.

I think this only shows us how desperate people still were for a real-life Pokemon game (and also one that didn't require buying gaming specific hardware). They put up with a terribly unstable app with few features that got less stable and removed more and more features over time.

Trundle• 9 years ago

Also everyone I encountered when I was playing had AR turned off. It was a fad itself within the fad of pokemon go. Fun for the first like 5 catches and then an annoyance/battery drain.

1_2__32• 9 years ago

You used a fad (Pokémon Go) to make a case for longevity. Not sure that's going to convince anyone.

yalogin• 9 years ago

I would only look at this stock after the first year. Having followed some of the previous high profile IPOs, we will see what happens after their employees are able to dump stock after the first year.

intrasight2• 9 years ago

I can't help but think the title should be "Nude selfies startup IPO values firm at $20 billion"

econner8• 9 years ago

Turns out people really want nude selfies.

intrasight2• 9 years ago

Many thousands of those (so I have heard) can be found on Tumblr. I think it means "people really want to take secure nude selfies".

kchoudhu• 9 years ago

Snap employees got screwed.

http://www.businessinsider.com/antonio-garcia-martinez-chaos...

jboggan2• 9 years ago

Santa Monica and Venice are going to get even more expensive in 6 months.

fjdlwlv2• 9 years ago

Snap is now trying to grow out of Venice because they've already businified/gentrified/grown too much and are getting a lot of local hate

Apocryphon6• 9 years ago

Makes me wonder if Spiegel will bite the bullet and open up a SV office, like Tinder has.

justinzollars• 9 years ago

I'm just glad its not in San Francisco! Too much money lives here.

teen• 9 years ago

are they tho ?

jboggan2• 9 years ago

Brand new 2.65M condo units next door to me in Santa Monica. One immediately sold and I expect the rest to go as soon as all these paper millionaires in the neighborhood turn real.

Venice has already turned into the most expensive rental market in LA [0] and it is dragging Santa Monica's prices up with it. I'm in a rent controlled apartment and I don't think I will move out of it at this rate unless I leave California entirely.

0 - http://www.laweekly.com/news/how-venice-became-the-most-expe...

miles_matthias• 9 years ago

Can we take a second to laugh at the guys wearing spectacles on the trading floor at 9am?

mtgx• 9 years ago

Hopefully now they have no excuse not to implement end-to-end encryption in their app.

synaesthesisx• 9 years ago

SNAP's real value lies in its future as an augmented reality company. They've spent something close to $1B in R&D - likely going toward hardware or something...

catshirt• 9 years ago

what gave it away? was it the VR hardware announcement they made a few months ago? :)

paulpauper2• 9 years ago

Bought some shares this morning. With 30-40% profit margin and huge growth, imho this will go higher.

bronz• 9 years ago

Shares opened at $24 and traded as high as $25.42 apiece Thursday, giving the company a market valuation of about $29 billion

there is no way for me to look at that and not be dumbfounded. some companies are unprofitable but still have a clear mechanism through which they could make money. tesla sells cars, for example. twitter and snap on the other hand have no way to make enough money to justify the hype. they can sell peoples data -- and that is a form of revenue that may face massive backlash and cooling very soon. this market cap is insane and we are in a huge bubble.

bdrool• 9 years ago

For reference:

- Snapchat is now worth nearly 10x Facebook's acquisition offer from 2013

- Snapchat is also worth ~1/14th of Facebook's worth

- Snapchat is also worth somewhere in the range of 2-3x Twitter

unholiness2• 9 years ago

Economics novice here. How did we get such a huge difference (40%!) between the IPO price and the current price, when both sides had $3.4 billion at stake on getting that price "right"? Is there some huge information disparity here?

Moreover, if investors feel that $24 a share is a fair price, why weren't they swooping in before the IPO and, say, offering $20 a share for the whole chunk?

Sorry if this seems like a ridiculous question, but it seems to me like there should be some extremely large free market force (on the order of $1.4 billion) preventing the founders and employees from missing out on all that money. Am I wrong?

johnrob• 9 years ago

If they priced the stock accurately, there would be a 50% chance the stock would go down on the first day. They want it to go up and thus under price it.

asher_• 9 years ago

Can someone explain this to me?

If I own something, I want to sell it for as much as the market will bear. I don't want to sell it and have someone flip it for a huge margin almost immediately.

How is a large first-day bump not considered a failure for an IPO? What is it about the situation that reverses a common sense understanding?

kevando2• 9 years ago

From what I understand, IPOs are very complex, but an ELI5 goes something like this: They want to open the stock to the public without crazy volatility in price, so there is a "pre-IPO" where brokers get access to buy it at $17, then $18, etc. and when people stop grabbing - they open it to the public. I think the underwriter basically buys all the stock for $17/share and then they broker it out to everyone, so anyone that buys over $17 is profit to GS. And GS assumes the risk that they priced it correctly and Snap is happy with $17/share so they're cool with GS profiting

cangencer• 9 years ago

AFAIK the underwriters typically don't buy and sell the stock themselves - but offer it to their clients, who can buy the shares at the IPO price instead of the opening price. The underwriters then charge a fee based on the size of the IPO.

chimeracoder4• 9 years ago

Moreover, if investors feel that $24 a share is a fair price, why weren't they swooping in before the IPO and, say, offering $20 a share for the whole chunk?

Well, they were. When a company IPOs, it doesn't sell its stock directly on the market - it sells it to intermediary bankers, who buy it at a price that they think will lock in profit for them when they sell it at the opening bell. (In addition, the early purchasers are also other bankers and trading firms - as an individual, there's zero chance that you'll get the IPO price unless the stock flatlines when it opens).

So, from the company's perspective, the ideal situation is to price that as high as possible, and actually overshoot the market price - that way, they leave no money on the table, and they can raise as much as possible for the number of shares they're selling. In that case, the share price will drop a few minutes after the opening bell, and it'll close trading that day somewhere below the opening price.

Note that that's exactly what happened with Facebook ($FB), and the bankers were pissed off. That's why you saw so many articles about the Facebook IPO being a "failure" at the time. It wasn't a failure for Facebook - they made a ton of money! It was a failure for the bankers who wanted to make a profit on the resale, and instead sold those shares at a loss.

I'm oversimplifying, because there was a lot of other stuff that went into the Facebook IPO that complicated it[0], but that's the general idea.

[0] a lot of people learned the meaning of the "reverse greenshoe" that day!

unholiness2• 9 years ago

Hmm. To me that just shifts the questions to the bankers.

If people (who don't know anything the bankers don't know) value the stock at $24, shouldn't there also be competing bankers willing to offer $20 a share for the whole lot, igniting a bidding war that converges roughly near the real price?

Obviously bankers need to make some money. But I don't see how this kind of deal has anywhere near a $1.4 billion dollar overhead, and I'm just boggled by the scale of the disparity.

abhi3• 9 years ago

Why would investors pull out $3.4 billion of capital from other assets to invest in Snap if the issue was accurately priced?

As an investor I wouldn't pay 100 to buy something worth ...100. Price it below its fair value and we might talk.

When trying to mobilize capital on this scale and at this risk level (no revenue, stalled growth), the required undervaluation is significant.

bhalperin• 9 years ago

Matt Levine explains this well https://www.bloomberg.com/view/articles/2016-11-25/appeals-c...

edblarney• 9 years ago

1) They try to be a shade conservative when pricing for IPO because the stock going down on day 1 is a very bad.

2) The underwriters are invented to keep it low because they basically keep the upside - i.e. they buy from Snap at the low price and will sell the next day on the pop.

3) It's volatile because there's little basis for the valuation - they're making almost no money and have a massive, massive valuation = it's hard to establish what they are worth = more variation.

4) Retail investor hype. Every dentist, doctor and retired guy wants a piece to feel like they are 'getting part of the IPO' and there's irrational exuberance which pushes the prices around.

harryh• 9 years ago

A big % of the shares purchased at the IPO price came with a requirement to hold the shares for at least 6 months. The people that bought on the open market today can sell whenever they feel like it. Not having that requirement is worth something. That explains part of the delta.

lordnacho• 9 years ago

You've found an interesting corner of the market.

I was partner in a hedge fund that hired a equity trader once. He's the only trader I've ever met who begged a broker to be nice to him.

So how does it work? Why on earth do IPOs pop so reliably on the first day? (FB is an interesting exception)

The company is only going to be a market virgin once. They don't have a lot of experience as a public company, of course. They certainly don't have a list of funds who are going to buy their stock, that's why they hire an investment bank to help them.

So what does the IB do? Well, they are most definitely not IPO virgins. They do however need to maintain relationships, so that they can tout their relationships to future IPO firms. So how do you do that? Of course you price the offering so that shares are scarce. That way you get two things. One, a reputation for presenting fund clients with almost sure winners. Two, a reputation for having ample access to buyers for your IPO firms. Three, funds will listen to your sales pitches (across many lines of business) because they know that now and again the IB will hand out goodies to their friends.

For instance a lot of Hedge Funds have backup prime broker accounts just in case bad things happen. The PB folks love to sign up funds because it's a foot in the door in case you get angry with the primary PB. So what do they do? They make strong hints that you should open an account so you can get some free money now and again. The amount of free money can be quite substantial per client, in the tens of millions for the largest funds. Ordinary desks will likewise say "hey trade with us, we'll see to it you get something in return from our IPO guys". Now naturally not everything promised can be delivered.

Why does the stock always pop on IPO? Why don't people who aren't allocated shares just walk away? I think this is psychological but seeded by the low-pricing dynamic. If you know the bank knows how many people are interested at different prices, and that they'll price it low, you know the price will go up. But everyone buying is going to augment that, especially if missing out on an allocation means you have to make up that PnL by jumping on the obvious trend.

BTW, rights issues are a similar dynamic, driven by access to shares that can be lent out for short selling. Free money for people who get the shares, bank decides who they want to do business with in the future.

jedberg3• 9 years ago

Looks like they are going to close with a market cap approximately three times that of Twitter...

econner8• 9 years ago

It's interesting to compare the two IPOs. Twitter opened at $26 and closed at $44 at a valuation of $25bn. Twitter had $650M revenue in 2013 for EBITDA of -$525M. Snap closed at $28bn valuation, had $404M in revenue in 2016, and EBITDA of -$460M. Twitter had roughly 100M DAUs and 230M MAU whereas Snap has 150M DAU and over 300M MAU. Snap is also 2 years younger than Twitter was and the number of minutes spent on the platform per user is much higher.

So, all the numbers are wacky and who knows.

Kazamai• 9 years ago

Ignorance is bliss in a world where half the people at YC could develop the core snap chat app in a week.

nemothekid• 9 years ago

You should have done it, and sold it for at least 100M then.

omarchowdhury• 9 years ago

Yeah, well, we still haven't figured out time machines.

InternetUser6• 9 years ago

This point was addressed on HN by user ChuckMcM in November 2013, right after Spiegel rejected Zuckerberg's buyout attempt:

The focus here is on the tech and not the market. A pet rock was 'worthless' (the rock was just a rock) but the connection with a generation was valuable. So often in our business we look at something that we feel like we could build (or could be easily built) and a valuation, and focus on those two things. The parts we don't see we give little value to (350M snaps? Seriously? That is a boat load of engagement). Making anything that get 350M 13-23 yr olds engaged is a pretty huge deal. That is what is valuable with Snapchat, not the tech.

https://news.ycombinator.com/item?id=6671371

moolcool9• 9 years ago

The pet rock was also only on sale for about a year before being discontinued due to poor sales.

bojl• 9 years ago

A lot of the comments in this thread are missing the point. No one cares if you use Snapchat, no one cares if you like Snapchat. The question is how much market space can Snapchat occupy, and will their bets on new technology (VR, drones, etc) work out.

lobster_johnson• 9 years ago

Snap Interactive, which an unrelated company, also saw a bunch of trading due to the IPO [1]. I'm sure this kind of name confusion happens a lot.

[1] http://finance.yahoo.com/chart/STVI

nkkollaw2• 9 years ago

Can someone explain to me how Snap can be valued this much?

I feel like I was asleep for 50 years and I just woke up and I have no idea how society works.

Don't they make a little sexting app? What happened!

quizbiz• 9 years ago

https://www.sec.gov/Archives/edgar/data/1564408/000119312517...

nkkollaw2• 9 years ago

Not very helpful.

This is in their timeline: "Lenses launch on Snapchat. Users barf rainbows for the first time".

I feel even more confused.

kevando2• 9 years ago

ITT: I don't have a Visa card, how can they be worth $1T?

kilroy1232• 9 years ago

Well, VISA only has a $200 billion marketcap.

kapkapkap• 9 years ago

Can someone comment as to what kind of payday this IPO translates to for say the 30th engineer hired by Snap? (I realize that this is impossible to answer accurately, and that there is still a 4 month lockup)

dvt4• 9 years ago

Interviewed with Snapchat about 3-4 years ago (sub-100 employees). Did not get an offer, but their interview process was pretty standard and professional. They were giving out 0.001% equity at the time. I'd say it would come out to 250k-500k, but it's very hard to extrapolate.

They were already a mega hit with like 10 employees so I doubt anyone that hasn't been there super early (like first 5 employees) will become a millionaire off this IPO.

khazhou3• 9 years ago

Assuming the founders held 30%, the employee equity was 1/30,000th that of founders. I don't understand how engineers are ok with their boss getting 30,000X their compensation.

econner8• 9 years ago

This just can't be right.

In fact, Snap's extreme generosity to employees has already swelled the existing share count. In 2016, it awarded 105 million new restricted share units (RSUs). All of those units, plus around 80 million awarded in previous years, will vest with the IPO. Those grants will represent one in six of Snap's shares. At $16 a share–the estimated high end for the price paid by the underwriters–those grants will enrich its 1,859 employees by $2.9 billion, averaging $1.5 million per person, although the rewards are, as usual, heavily skewed towards the top brass. And that's just a taste of what's coming.

http://fortune.com/2017/02/22/snap-ipo-dilution/

vecter5• 9 years ago

Given they were giving out 0.02-0.07% in 2014, it seems you're off by at least an order of magnitude if not more: https://wikileaks.org/sony/emails/emailid/139607.

econner8• 9 years ago

Let's say you started in 2013 when Snap's valuation was $800M. You were granted $80K (0.01% of the company). This is likely a very low estimate given what I've heard about snap equity. Snap raised good rounds so dilution isn't much of a concern. Snap went up 35x in value. As of today your equity would be worth ~$2.8M.

snapemployee2• 9 years ago

check out this leaked email: wikileaks-DOT-org/sony/emails/emailid/139607

Looks like engineers were offered 10k-35k shares at a $9.90 strike price in Jan of 2014.

So $250k - $875k. Not bad, but also not millionaire status. Also ISO's will be taxed heavily.

econner8• 9 years ago

Snap did a 1 to 10 stock split in July 2014 (https://www.forbes.com/sites/parmyolson/2014/08/08/snapchat-...).

That means, today, those grants are at least 100k - 350k shares at a $0.99 strike price (assuming no other splits). Or $2,300,000 to $8,050,000.

Unless I'm missing something?

Edit: Ah the numbers above are actually too low. If you look that email also lists the percentages. 10,000 shares at that time was 0.022% which at the current valuation is actually $5,280,000 less some likely dilution.

notadoc2• 9 years ago

I can't help but remember this Frontline from 2002

https://www.youtube.com/watch?v=c4TlmkhE3Mw

Is Snapchat really worth more than CBS? More than Thomson Reuters? Intuit? HP? Nokia? Discover? EA? Why?

cwkoss• 9 years ago

I wonder how much child pornography goes through snapchat. Given the demographics of their users, I'd bet it's quite a lot. Seems like a pretty major business risk.

adventured2• 9 years ago

You're incorrect, it's a near-zero business risk. The laws regarding how to deal with it are well developed at this point. Reddit, Imgur, Google, Facebook, Instagram, Viber, Kik, Gmail, Hotmail, Yahoo, Twitter etc - all have or have had a similar challenge in dealing with it in regards to scale, but in the case of Google or Facebook they're dealing with a drastically larger scale problem than Snapchat will ever see. All Snapchat has to do is follow the same laws that all the other hundreds of popular Internet companies do.

facepalm• 9 years ago

Is Snapchat strictly for entertainment, or is it also a way to stay up to date by following Tech influencers (like Twitter)?

gumby• 9 years ago

What is the justification for celebrating the big jump in first day price? Why isn't it a condemnation of the banks who got SNAP to leave a lot of money on the table?

Snap Jumps in Debut After App Maker Raises $3.4B in IPO

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