Okay, so I was invited to discuss on air with Ben van der Burg and Herbert Blankenstijn about the upcoming IPO of Snap, the company which owns Snapchat.
The main question was whether or not the IPO will be succesful.
The most interesting parts of the S-1 filing:
"We are a camera company."
"We don't know if we'll ever be profitable."
"Our user growth is flat since Q4 2016"
"We see Apple, Google, Facebook as our biggest competitors"
"We, the founders, keep all the voting rights so basically decide what we will do will the company."
For me this implies they are going to drastically change their operations.
Listening to us for an hour is very long (especially if you don't speak Dutch in this case). So this blogpost is here to outline and emphasize some things we talked about.
What does 'We are a camera company.' mean?
Snap is experimenting with real life products like Spectacles. But I think it goes a little deeper than that.
For me it means that Snap is actual saying that they (now really) understand the way people use imagery (photos and video) to connect to one another. I compared the Spectacles product to other companies who have tried similar things.
Google Glass has failed. I think because it was focussing on everything. On augmenting datapoints in real life, image recognition, sending texts and emails, on taking pictures, on reading recipes while cooking etc. etc. They actually tried to put all the functionality you allready have in your phone in your glasses.
GoPro is very succesfull, but focussing on extreme sports, plus the end result is not so sharable. You need a lot of skills, time and other resources to make your GoPro content shareable. Tom Tom has tried this as well with the Bandit, which does some automatic editting (based on your heart rate). Both have not figured it out yet.
Snap has figured out the waty how people love to share their lives. And now they will move up the chain. They've done their R&D with the camera products in your mobile phones. They have a big understanding on how people ranging between 14-35 want to share their lives and now they can create products, single purpose ones, which help you do that.
And they can design it also for that single purpose. The technology itself is cheap. Again they don't need they very best quality technology, they just need a camera, a button to start recording and saving, a wireless connection and some power.
That stated, they designed it for fun, nothing more. Look at the design. Google designed their glasses for nerdy Star Trek fans. When you wear it, people will smile (or laugh :P), it's a party.
I compare it to the Amazon Dash. A wireless pod you can stick anywhere in your house. You can easily configure it to order one thing. Pressing the button will simply send that order again and again to Amazon.
The Snap products could be the single purpose devices for sharing your adventures with your frans (friends and fans).
Also the fact that the founders keep all the voting rights means that they most likely will do drastic stuff.
The business model and 'We don't know if we'll ever be profitable'
The revenue and phrasing of what Snap actually is (We are a camera company), for me implies that the management is stating that they don't see advertising as their most important revenue stream in the future. In 2016, according to the filing, they have generated 404 million dollars of revenue. But if you look at the ratecard with products ranging from $ 50.000 - $ 700.000 (per day!), this implies that this money comes from the really big advertisers.
So even if you would take the most expensive product and create real special stories/filters 5 major clients every day, you would generate 1.3 billion dollars of revenue (tripling the 2016 revenue). I also think the users would get fed up with it and there would be no distinctive character in the user experience.
That's for me another sign they are moving up the chain. And do that towards two directions. One direction is towards hardware (for their creators), the other might be towards different models for the viewers (advertising).
For the last group the Memories product could become more diverse. Right now Snap has no web presence. That means advertisers always have to reach viewers in the app. Especially for Memories, I see different potentials.
Snapchat has done an impressive job soaking up attention by covering three different use cases with a single app: private messaging, social media Stories broadcasting, and professional Discover content. All three have different monetizing potential.
Basically Memories are Stories which users have saved. From a curation point of view I think that is smart. Memories allows users to be proud of their content. Maybe meaning they will put more effort in it. That's content which can be monetizable in different ways in the future.
The average daily user opens Snapchat 18 times a day and uses it for 25 to 30 minutes, with 60 percent of them creating Snaps and/or using its chat feature daily. 2.5 billion Snaps have been created,
The daily usage and time in the app is impressive, but how bad is it that the growth has stalled? Well it is not good of course, but considering the way Snapchat has grown over the last years and the fact that the content is not viral (you have to follow someone to see the actually encounter the content) I don't think it is that strange.
It is a trigger to move fast. 3 billion (the amount Snap wants to add to their accounts via the IPO) can maybe help them grow again.
Would I invest?
If I would invest in tech companies other than my own, I might invest in Snap, but it is quite the gamble. The fact that they made a deal a few days ago with Google about the infrastructure, worth 2 billion dollars in 5 years kind of worries me. That's a big lockup of money for quite some time in tech time which they might want to spent differently in the end.
If you do speak Dutch and want to listen to us, check the interview below.