Snap Inc publishes details of $3bn IPO, promising growth but not profit

Snap Inc files details of IPO / Snapchat

Snap Inc, the owner of Snapchat, has published the details of its plans ahead of a $3bn initial public offering (IPO) in March.

According to Reuters, the document outlines major growth in user numbers and gives an insight into the fact that the business hopes to woo investors with strong growth ambitions.

According to Snap Inc, its daily active users grew to an average of 158 million at the end of 2016, up 48% over the past year.

The document also included financial details, cementing the view that the company was only in the early stages of monetizing its growth. According to Reuters, its net loss widened to $514.6 million in 2016 from $372.9 million the year before.

Snap conceded in the filing that it attracts a smaller audience than giants like Facebook and Google, but it has sought to show how its popularity among younger users can set it apart.

Director of social at OgilvyOne, Rob Blackie, pointed out that the filing has for the first time offered up some “credible figures,” from the firm noting that engagement is high and the time-spent statistics are “way ahead of virtually all other platforms with Snapchatters spending 25 to 30 minutes per day in the app. He added that 60% of users create something daily on Snapchat, saying: “These metrics look very like Facebook for stickiness.”

“One big challenge is notable by not being mentioned,” he continued, “how does Snapchat expand beyond its core youth audience?”

Snapchat's daily active users are indeed concentrated in the 18 to 24 year-old demographic, but Snap has underlined Nielsen data demonstrating Gen Y's shift away from linear TV in the document, hinting at the opportunities this could offer up on the content side.

The firm has also acknowledged that it doesn't have "longer-term," commitments with advertisers and that its efforts to establish such relationships may not succeed, adding that no single advertiser or publishing partner accounts for more than 10% of its revenue. For investors this is a catch 22 – it means that Snap isn't pinning its financial success on business from one single advertiser, but without long-term deals many brands are still in the test-and-learn phase meaning only a relatively small portion of their overall ad budget is spend within its walls.

Nonetheless, networks like WPP have strong ties with Snapchat. Sir Martin Sorrell recently admitted that his network spend three-times the amount it had set aside to invest in the platform last year, handing over a total of $90m on behalf of clients.

Another attraction for would-be investors is the company's revenue growth which jumped from $59m in 2015 to reach $404.5m in 2016 - a boost of 600%.

Snap Inc had confidentially filed for an IPO late last year and since then, the details of the plan had been coming out piece by piece. While it was expected, it was only earlier this week that it was revealed that the company would file with the New York Stock Exchange.

According to reports, the IPO could set the company’s worth at between $20-25bn, despite an apparent lack of clarity around its plans for monetization.

Ahead of the IPO but since the financials would have been collated, Snapchat has made moves to open up for further monetization.

It was reported earlier this month that it was looking to broker multi-million dollar ad deals with advertising groups such as WPP and Omnicom. It also announced this week that it was opening up its ad platform by allowing third parties to access its ad API.

The company has also been cosying up to Interpublic Group (IPG), partnering with the holding company to sponsor a startup investment initiative run by its digital agency R/GA. The duo will handpick 10 startups from the ad tech world to take part in an accelator programme which aims to make it easier for brands to create mobile content.

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