Posted on February 10, 2017 by staff

Is Snapchat here to stay?


Sometimes I just don’t get tech. As the editor of a tech magazine like BusinessCloud that might sound like blasphemy, but it’s true.

My shock admission was prompted by the story of Snap. I’m 44 years young so I’m not the target demographic for the company’s Snapchat messaging app.

For those who don’t know, Snapchat allows users to send images and messages that disappear within seconds of being opened. Why you’d want to share a picture of your dinner with friends or a selfie that makes you look like a dog is beyond me, but it has 150 million users and the kids love it.

Here’s the bit I don’t get. Snap is set to float and the business is expected to be valued at between $20bn and $25bn. And yet Snap has never made a profit.

According to reports that I read in the BBC and the Financial Times, the company had sales of $404m but made a loss of $515m last year. That’s $515m folks!

Snap is reported to want to raise $3bn in an IPO – which would be the largest US tech IPO in years. According to a report in the FT, Snap’s global average revenue per user in the quarter was $1.05, a significant increase from $0.31 a year earlier.

In North America, the figure was $2.15. Snap generates money through adverts and other companies looking to extend their brand reach to Snapchat’s young audience.

Now look at Facebook. Once again I’m indebted to the FT: according to them, Facebook’s  average revenue per user in the fourth quarter in the US and Canada was $19.81, while the global average was $4.83.

Facebook is a phenomenal success but you only need to look at the story of Twitter to realise that having a popular social media platform doesn’t mean it will make any money. Donald Trump might love Twitter but that doesn’t pay the bills.

I was reading that Snap’s co-founder and CEO Evan Spiegel will be sitting on a stake worth up to $5.5bn if the company goes public with a valuation of $25bn – and good luck to him.

But here’s the thing. Who’s to say Snapchat won’t be replaced by the next social media phenomenon that we currently haven’t even heard of?

Anyone with teenage children knows that their tastes are incredible fickle. If that’s the case then it won’t just be the snaps on Snapchat that vanish in front of your eyes.