As the IPO of the company now known as, “Snap,” draws closer, we are learning more about life behind the scenes of the company which created and grew Snapchat. Recently released SEC documents show a business very aware of its shortcomings, but with plenty of problems to solve.
It shows increased revenues and staggering costs which equate to substantial losses, which continue to increase. In 2016 Snapchat lost just over $514 million, which is up from a $370 million loss the previous year. To temper this, revenues of over $400 million, are substantially up from under $50 million the previous year.
The Snap filings also demonstrated a significant reliance on Google Cloud, and a plan to increase their investment in the platform to a level of $400 million a year. The SEC documents pointed to a worrying reliance on Google, and medium term plans to create failsafes in the unlikely event of a critical failure by Google, which already has robust failsafes in place.
Perhaps most interesting to investors, are the social media cornerstones stats of daily users. During the last quarter of 2016, Snapchat had 158 million daily users, which is an increase of 48% from the same time the previous year.
However, most concerning to critics of the IPO, is the fact that Snapchat has never made a dollar, and through increased investment in staffing, and addition additional technology, this is unlikely to change in the short to medium term. There is also additional concern about the structure of business post-IPO, and if existing management has the capacity to manage a multibillion-dollar business.
Regardless, the Snap IPO is likely to be the most watched investment spectacles of 2017, and will likely transform the business from a fledgling social media concern, into an advertising powerhouse. Whether or not the model can be a success is a matter of continued conjecture, but investors and managers alike, are confident that a $2 billion injection will make all the difference.