Is Snapchat’s IPO worth investing in?

A few things to consider

There´s much talk lately about Snapchat´s (now Snap Inc.) upcoming IPO. Bloomberg reports the company is planning to go public in the first half of 2017 for $40 billion.

Here´s a list of facts to take into consideration:

The company reportedly generate about $300 million in 2016, up from roughly $50 million last year.

Facebook, by comparison, is expected to generate about $27 billion this year. And although it boasts a massive $370 billion market cap, Facebook’s stock is trading at only 10 times as much as next year’s projected revenue.

Evan Spiegel, the company´s founder is often referred to as a Picasso in the Tech industry. Here´s some of his most Radical-sounding ideas that have proved to be right:

 – Before Snap, the internet was permanent. Every tweet, message, or photo was documented forever on sites such as Google and Facebook

 – Snap popularized vertical video, a format that makes much more sense on phones. Horizontal video, the so-called landscape mode that you watch TV shows and movies in, was the undisputed standard for video until Snap came along.

 – Turning down a roughly $4 billion acquisition offer from Facebook turned out to be smart. It’s not easy to refuse an offer from Mark Zuckerberg — just ask the founders of Instagram, WhatsApp, and Oculus — especially when the offer is multiple billions of dollars. But three years later, Spiegel’s company is already worth about five times Facebook’s offering price, and if it IPOs at $40 billion, Snap will be worth 10 times that.

 – He’s rethinking the shape of photos and videos from squares to circles. The idea has yet to be proved, but Spiegel’s logic is sound. For Snap’s Spectacles sunglasses, “the video it records is circular, more like human vision

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Snap doesn’t have just one hit product — it has at least 6. When Snap launched, it looked like a fad. It was considered a sexting tool for college students that made lewd photos disappear.

But a lot of red-hot apps that fail to keep innovating die shortly after launch: Yo, Ello, Meerkat, even Pokémon Go quickly lost its cool.Instead of riding out its one smash hit, Snap launched a series of new products that kept users sticking around:

 – Snaps. In 2010, Snap launched its flagship feature: disappearing photo and video messages. Now more than 1 billion snaps are viewed every day. Video views on Snapchat have grown more than 350% in the last year, to more than 10 billion daily views.

 – Stories. In October 2013, Snap allowed users to create strings of photos and videos that disappear in 24 hours, called Stories. Stories are now viewed by 10 million to 20 million users a day.

 – Discover. Snap launched Discover, a section for media publications to post articles, in January 2015. Now 100 million users view it every month. That’s vastly lower than the number of people who are snapping back and forth each day, so you could argue Discover isn’t a hit. But it accomplished an important goal for Snap: It infatuated the media. This worked for Facebook when it began driving traffic to publishers from its news feed.

 – Filters. They launched in December 2014, and users now view snaps with geo filters more than 1 billion times a day

 – Lenses and Messaging are also popular on Snapchat. Even sponsored lenses that Snap makes money from are getting a decent amount of user interaction. For example, Taco Bell’s Cinco de Mayo taco-face selfie lens was viewed 224 million times.

Can Snap become a behemoth the size of Facebook or Google with more than 1 billion users? If so, then a $40 billion valuation isn’t outrageous.

Or will it become Twitter, which tried to chase Facebook’s scale but never quite nailed the experience for the masses?

Read the original article at BusinessInsider.com

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