Snap Inc.’s initial public offering pushed Bobby Murphy and Evan Spiegel’s business ahead of social media giant Twitter. It even created itself a worthy rival of Facebook. Snap Inc. is the company behind Snapchat, the disappearing messaging app. It went public Thursday morning at a price that valued the tech company at an outstanding 33 billion dollars. Although Snap Inc. may be regarded as a loss-making business, it catapulted its young co-founders into the tier of billionaires in the tech industry.
Soon after co-founders Murphy and Spiegel rang the bell for the opening on the NYSE, Snap Inc.’s share price quickly rose to 41%. Its guide price was set at $17 a share, but the opening price was at $24.
Within minutes, the stock rose at an additional $1, and it seemed that it was poised to go higher. The move gave the investors some level of comfort, especially those that were expecting the sale of Snapchat to push the success of other tech firms including Airbnb and Uber to list publicly.
Snap Inc.’s IPO created a rival for Facebook. Yet, the latter remains to be the leader in online and social media advertising. Nevertheless, the CEO of Facebook, Mark Zuckerberg, showed clear signs that his company sees Snapchat as a threat. Facebook actually made an offer to purchase Snapchat for billions of dollars, but the offer was turned down by its co-founders.
According to Snapchat, hundreds of millions of people use their service every single day. As a matter of fact, 2.5 billion ‘snaps’ are created daily. The average user of Snapchat is younger than the demographic of Facebook and spends 30 minutes to an hour each day on the app.
The growth of Snapchat slowed to just about 48% year-on-year. While Snap Inc.’s revenues have grown over 600% in just a year, it mounted losses of over $500 million in 2016.
These numbers are causing a tension between Snapchat and Facebook. Snapchat’s sale is the largest ever since the IPO of Alibaba, a Chinese e-commerce company, in 2014. The launch also made Snapchat come ahead of Twitter which is valued at $11 billion. Twitter is one of the tech companies that were hyped ahead of their IPOs but proved to be huge disappointments to investors.
The sale of Snap still leaves it short of Facebook, which is currently valued at $393 billion. One must take note that Facebook’s Instagram copied most of Snapchat’s features which made loyal users of Snapchat furious. Some, including Spiegel’s soon-to-be wife, Miranda Kerr, ditched Facebook as they can’t stomach Facebook’s lack of originality.
Snap’s revenues in 2016 only amounted to a small fraction of Facebook’s 2016 revenues. However, WPP chief executive, Sir Martin Sorrell, called Snapchat ‘important’ in social media advertising. According to Sorrell, Snapchat may be the third force against Facebook.