Snapchat opens its IPO +44%, valuation nearly $35 billion

March 2, 2017 – Snap Inc. (SNAP), the parent company of Snapchat began trading at $24 a share this morning on the New York Stock Exchange at a 40% increase. The price went as high as $26.05 and finished the day at $24.48 totally a gain of 44%. After this closing price, the current valuation for the company is nearly $35 billion. 

Snapchat was created in 2011 by Evan Speigel as a project for one of his classes at Stanford University. The idea was to create a selfie app which allowed users to share that were short lived and self deleting. Spiegel then brought in Bobby Murphy to help with the coding of the app. In July 2011 the two launched the iOS app under the name Picaboo, two months later it was relaunched as Snapchat. Today Spiegel is the CEO and Murphy is the CTO. Spiegel is 26 years old, as a part of the IPO he owns 210 million shares of Snap Inc. worth around $5 billion and sold 16 million shares for around $272 million. Spiegel will also receive an additional 36 million shares through the “Good CEO” award over the next 3 years totally his worth at over $6 billion. His founding partner, Murphy, also holds more than 200 million shares. Although he does not get the same additional shares as his partner, the two still hold voting power of the company to ensure Wall Street investors have no say in how the company is run. 

What is Snapchat?

The app is used primarily to create multimedia messages called “snaps,” these can consist of photos or short videos and the app offers the ability to edit or add filters. In July 2014 geofilters based upon users’ location were added, “Lens” allows users to add real time effects using facing recognition software was added in September 2015. Snaps can be sent privately to contacts as well as shared publicly using the “my story” feature. In January 2015, Snapchat added the “Discover” feature providing ad supported content from major channels such as Buzzfeed, CNN, ESPN, and more. Snapchat now offers messaging between users and has also recently allowed advertising when viewing stories. 

Where can they go from here?

Now that Snapchat has successfully launched one of the biggest IPOs in tech company history, where can they go from here? In an article by Adweek, three digital advertising companies gave their thoughts on the future of the app. Obviously, with Instagram copying some of Snapchat’s key ideas like the ‘My Story’ feature, growth of the app has slowed. One of the biggest advantages, the advertisers state, is their ability to reach a younger audience. During some recent ad campaigns, these advertisers had success using geofilters to reach the Snapchat audience (a younger demographic). For instance, the Huge Advertising firm purchased a sponsored lens to promote “Ash vs Evil Dead.” Using statistics, the company came to the conclusion that the filter lead to approximately 22.5 million earned views of the movie with a particular increase in the under 25 demographic. 

Sebastian Saldarriaga, the associate director of social media at Huge said that Snapchat has to find out “how to have a branding message that could only live on Snapchat that Facebook won’t copy.” He used the recently released Snapchat Spectacles as an example. “If they are able to build a new, innovative platform that integrates beyond the app, they will be positioned to continue to grow, and there’s a lot of potential abroad in untapped markets,” he added. Otherwise, Snapchat could easily “suffer the same fate as Twitter,” which has been “deprioritized for most brands.”

In conclusion, Evan Spiegel and Bobby Murphy are the most recent members of billionaires living in Silicon Valley. Snapchat has a bright future with high potential in the market they basically created. The company has already created a good way of monetizing the app with their ‘Discovery’ and ‘Geofilter’ features. The app has a huge advertising potential especially considering its access to the younger generation, this evident in the exorbitant valuation post- IPO. Although the companies debut is considered an extreme success, their is some cause for concern. We have seen a company open like this before as noted by TechCrunch, Twitter. The company went public in 2013 and saw a solid first day of trading, but experienced some real volitility in the following months. Good luck to Spiegel and Murphy in the future, I expect big things from the company through this transition. 

SNAP trading at $27.09 – March 3, 2017

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s