SnapChat Moves Forward With IPO That Could Make Its Founders Billions
Evan Spiegel has been clear about his intentions to take Snapchat public for the past year. In 2015, before the company announced it would be moving beyond ephemeral messaging and into hardware, he sat onstage at Recode’s annual Code conference in Rancho Palos Verdes, California, and teased the idea of a public offering. “We need to I.P.O., we have a plan to do that,” he said.
Now, Snapchat’s newly named parent company, Snap, seems to be putting a plan to go public into action. Snap has picked Morgan Stanley, which led an earlier round of debt financing, and Goldman Sachs to lead its I.P.O., Bloomberg reports. Not wanting to be left out of a potentially huge tech I.P.O., Credit Suisse, Barclays, JPMorgan, Deutsche Bank, and Allen & Co. will also all be joint bookrunners in a public offering that is expected to value the company at $25 billion or more. That valuation is based on Snapchat’s own revenue forecasts and user growth. A pitch deck from Snapchat’s Series F round of funding revealed that last year, Snapchat brought in $59 million in revenue—a low number that reflected the fact that Snapchat had only just began to monetize its business. This year, Snapchat says it will generate revenues between $250 million and $350 million. And next year, the company estimates it will reach revenues between $500 million and $1 billion. Analysts at eMarketer also say that Snapchat could reach nearly $1 billion in ad revenue in 2017.
Those numbers are bolstered by a number of new efforts to generate revenue. Though it first offered expensive advertisements a year ago, asking brands for a minimum of $750,000 for a one-day ad, Snapchat has since built out its advertising offerings. Now, for example, advertisers can pay in the neighborhood of $250,000 for a “Live Story” ad or $50,000 to take over a publisher’s channel on Snapchat Discover. Advertisers can also create “Lenses,” customized, popular face-distorting photo filters, and pay for them to appear in front of Snapchat users.
A Snapchat I.P.O. would be good news for Silicon Valley, which has seen a slowdown in public offerings since 2014, when Chinese e-commerce behemoth Alibaba went public at a $168 billion valuation. A Snap I.P.O., which could happen as soon as the first three months of 2017, would also be vindication for Spiegel and co-founder Bobby Murphy, who famously turned down an acquisition offer from Facebook for $3 billion in 2013. In the event of a $25 billion I.P.O., both co-founders would own a $4 billion stake in the company, CNBC reports.