Over the past years(as a new grad) I thought that I would've killed to work at Snapchat, Fitbit, Uber, or Twitter. Now, I wouldn't touch any of those companies with a 50 foot pole. I've grown extremely cynical about startups and the extreme hype that surrounds them.
That being said, at Internapalooza this year, the longest line there was for SnapChat and every young person seemed enamored with them. And I remember a time where everyone was screaming that Facebook would fail because of it's lack of profit or that Twitter was the next Facebook/Google.
This is all a long way of saying that no one knows what the hell they are talking about when they discuss these companies. Whether that's posters on HN, financial talking heads, or even successful people in Silicon Valley. If you have some advantage on the market, and can predict the correct valuation of Snapchat, then:
1. Put your money where your mouth is. Buy or short the IPO.
2. It's probably wise to not share your take as it relinquishes the advantage you think you have on the market.
3. Hope you stay solvent longer than the market stays irrational.
Just remember, these same "experts" said that no one needed DropBox when they had wGet.
People are asking if Snap is more Twitter or Facebook. From my (light) exposure, it doesn't seem like either. It's more like a lifestyle-aware replacement for Apple Messages + Camera -- two of the most heavily used apps on any phone. (For Android, replace Apple Messages with whatever Google calls their text chat app this week.)
The closest comparison could be WhatsApp, and that was valued at $19 billion. So I'm not sure that Snap's valuation is as outrageous as it seems based on traditional metrics.
Also, I've been really impressed by the design of the Spectacles. The yellow charging case is a brilliant way to make the glasses lighter. Snap is the only major tech company that understands anything about playful design -- Apple, Google, Facebook and Microsoft are all treading the same safe paths of post-Jobsian blandness.
Whatsapp was privately valued at $19B by way of acquisition. Proactively buying growing competitors to defend a moat, even competitors with hundreds of millions of users, does not establish a valuation the same way an IPO does.
I don't have a strong opinion on Snap's IPO (I guess I hope it does well for industry health?) but I strongly push back on using private acquisitions as a barometer of IPO health.
If you have a large amount of money you don't mind gambling with and can afford to stay solvent longer than the market can stay irrational, I feel like this is the best short ever.
My 5 year target on SNAP would be roughly one can of Pringles.
When the next market meltdown happens, Michael Lewis will write a great book about people buying non-voting shares of a fad company at a $24b valuation that says in its prospectus that it has no plans to make money and maybe never will.
Or I'm wrong and they won't be a fad and will figure out how to monetize, but I feel like the multiplied probabilities of both make it as clear a bet as you ever get.
Have you ever shorted a company? It really isn't advice you should be loosely throwing about - the potential downside is unlimited. It really is a tool reserved for those with special broker access and a better understanding of what it means.
Further, if anybody had actually followed any of the short advice that has been given in HN comments in the past 10 years, they almost certainly would have lost unlimited amounts of money.
If you really want to put your money where your mouth is, post some bitcoin, a term period and a price target and see if anyone takes you up one it. I'd almost certainly book everything you offer on SNAP going to $0 in 5 years.
Yeah well I thought GOOG was a dumb investment since >95% of their revenue came from AdWords and surely MSFT & others would pump billions in and make a real dent.
The vast majority of their revenue is still from AdWords despite those billions being spent, but that GOOG pie's only grown over time.
They've already figured out how to monetize, and did $400M in revenue last year. I do think that the $24B valuation is a bit high, but I don't think it's "the best short ever."
> says in its prospectus that it has no plans to make money and maybe never will
Assuming you are talking about this sentence from the "risk factors" section of their S-1:
> We have incurred operating losses in the past, expect to incur operating losses in the future, and may never achieve or maintain profitability.
That's relatively boilerplate and doesn't really mean much. The "risk factors" section is always very gloom-and-doom to avoid the appearance of over-promising returns. For example, Workday said "we have a history of cumulative losses and we do not expect to be profitable for the foreseeable future" in their risk factors. Shake Shack included "our inability to open profitable Shacks" as a risk factor in their S-1. Google listed pages and pages of "risks" that basically boiled down to "advertisers might stop using us". It's really not that unusual to say something like that.
You might be right and Snap could be headed for a big fall, but that statement alone isn't much of an indicator.
Shorting snap will be hard right after the IPO, but if SNAP tanks, the whole tech sector is going to fall over, so shorting basically anything is probably a strong play.
They are pricing right at the top of their range with this if the rumors are true. I don't think they are announcing hte actual price until after the close.
One one hand raising as much as possible is very nice for the company but to temper that sentiment I think it was Robin Li, the Baidu founder, who made the comment that while he was very happy with the first day pop his stock had, it was an actual curse.
he was prepared to run an XX Billion dollar business and hit his targets but with the opening day pop he was now running a 2X Billion dollar business and that made things significantly harder than if the stock had risen gently over the course of 4-8 quarters.
I wish the Snap team well, but they'll have a few hiccups coming.
They've been private long enough that a deluge of shares will come free trading this year and they'll at some point have to do the tight rope walk of switching from telling wall street to look at user growth to looking at profits.
If you want to invest I'll quote someone sitting beside me. "The problem with Snap is determining if they are more Twitter or Facebook."
From a wall street perspective this IPO was a bit different. It was about 10x oversubscribed, which is alot but not uncommon. What was interesting was that alot of mutual funds got almost full allocations and hedge funds were shut out compared to what they would normally get.
Anyone knows their growth numbers since the introduction of Instagram Stories? For influencers with a following in the 18+ age range this was the day a lot quit Snapchat (including myself).
I don't use Snap products, but from my totally uninformed, unengaged vantage point it seems to me that Snap is valuable because they present a different set of values to their users then Facebook, Google, etc.
Their first product wanted to challenge the permanence of our digital stuff. (Forget the underlying technology.)
The glasses are about challenging this kind of Google/Apple model of the person as some elegant cyborg from the Jetsons. They offered a toy for, like, just goofing off.
I imagine users like it because it's not crammed with ads and spam yet.
$24B is about half of what it costs to build high speed rail from LA to SF, or a third of what it might cost for a manned mission to Mars.
Compared to what it probably costs to operate and develop, $24B sounds redonkulous. Compared to those other projects, it's hard to see what Snap has that's so rare.
Maybe the better comparisons are Nike (market cap $95B) and Coca-Cola ($182B). Snap is using near-commodity economic inputs and outputs to express a point of view and build a brand.
All of this is speculation from my deep crater of ignorance.
Somehow I've managed to see exactly zero comments about Whatsapp stories in this thread, which really surprises me. I think that's a hell of a lot more scary to Snapchat than Instagram stories. Most people with Instagram have Snapchat, but most people with Whatsapp do not have Snapchat.
For those who don't know (and I don't know much) Whatsapp just launched a stories feature, similar to Instagram or Snapchat.
> I think that's a hell of a lot more scary to Snapchat than Instagram stories. Most people with Instagram have Snapchat, but most people with Whatsapp do not have Snapchat.
You're also forgetting Facebook stories which is a stories feature for the main Facebook app that inserts the stories in a spot right above the newsfeed.
FB have effectively copied the stories feature across all of their media properties (FB/WhatsApp/Instagram). I'd imagine they'll eventually add the ability to cross-post selectively.
What I find really interesting in that number is that according to Matt Levine the IPO has been already oversubscribed 10 times.[0]
This kind of number strongly implies that one can expect the immediate post-IPO valuation to be quite a bit higher. However, once the aggressive stock flippers are done, there's no telling where the stock price finds its equilibrium.
I don't see that snapchat has the lock-in to make it worth the risk. Sure you can leave other social networks and it's always a risk but Snapchat's ephemeral nature seems to make that risk much much worse. That said I only used it for a week before I got annoyed by it so maybe I don't have the best perspective.
Note that on Robinhood you're only entering a "pre-ipo" bid but are not participating in the ipo -- i.e., you aren't guaranteed that your order will fill at any point
What I don't understand about this is if I'm using Instagram Stories, just because I happen to be an active instagram user....why would I ever switch to Snapchat other than audience? I can get alot of the same audience on Instagram already. Stories does the trick mostly
People my age (22) just use Snapchat to flirt or post pictures of parties. No one - and I mean no one - ever checks out the articles in the Stories section of Snapchat. I really don't see any way for them to make money at this point.
Snapchat is Comcast for your face, without the need for pipes. They want to own the distribution of video content on mobile (and eventually AR), whether it comes from your friend or from NatGeo. Right now, it's hard to get started on Snapchat for small vendors. It makes a lot more sense for large companies. This differentiates its strategy from Google and Facebook in a big way -- it's more demand generation (which FB also serves) than end-of-pipeline marketing. I am not sure how this limitation affects its growth potential. Thoughts? Will they open it up to smaller clients? How will the limitations of the format affect ads?
You don't see value in an engaged audience of nearly 300 million people using a product regularly? Really? Zero? I think that's an incredibly unfair and naive thing to suggest to be honest.
Human attention is a finite and hard to capture resource. Snapchat has a lot of it (its users spend a lot of time looking at the app). Advertisers are willing to pay a lot of money for people's attention.
A lot of people think there will be a big shift in brand advertising away from TV and towards the internet (brand advertising is aimed at general awareness about a brand and forming positive or desirable associations with that brand in people's minds). Snapchat is very well poised to capture a lot of brand advertising money if this shift happens in the next several years. Not only do they have a large, highly-engaged user base, but also brand advertisers are often especially eager to reach younger consumers who are just beginning to form impressions of brands.
Of course, there are a lot of "if"s in all of that. But they do have a clear path to bringing in massive revenue if everything goes well.
How is Twitter being monetized? Facebook? Uber? Instagram?
Say what you will about valuations in general, but Snapchat is rare in that they've produced a physical product and set some sort of future goal in hardware (specifically cameras). So If everyone else gets a C, I'd at least give them a C+.
Have you even used Snapchat? News networks and blogs are always keeping up featured spots on the stories tab of the app. It's become an advertising tool.
[+] [-] oculusthrift|9 years ago|reply
That being said, at Internapalooza this year, the longest line there was for SnapChat and every young person seemed enamored with them. And I remember a time where everyone was screaming that Facebook would fail because of it's lack of profit or that Twitter was the next Facebook/Google.
This is all a long way of saying that no one knows what the hell they are talking about when they discuss these companies. Whether that's posters on HN, financial talking heads, or even successful people in Silicon Valley. If you have some advantage on the market, and can predict the correct valuation of Snapchat, then:
1. Put your money where your mouth is. Buy or short the IPO.
2. It's probably wise to not share your take as it relinquishes the advantage you think you have on the market.
3. Hope you stay solvent longer than the market stays irrational.
Just remember, these same "experts" said that no one needed DropBox when they had wGet.
[+] [-] pavlov|9 years ago|reply
The closest comparison could be WhatsApp, and that was valued at $19 billion. So I'm not sure that Snap's valuation is as outrageous as it seems based on traditional metrics.
Also, I've been really impressed by the design of the Spectacles. The yellow charging case is a brilliant way to make the glasses lighter. Snap is the only major tech company that understands anything about playful design -- Apple, Google, Facebook and Microsoft are all treading the same safe paths of post-Jobsian blandness.
[+] [-] seanmccann|9 years ago|reply
[+] [-] dsacco|9 years ago|reply
I don't have a strong opinion on Snap's IPO (I guess I hope it does well for industry health?) but I strongly push back on using private acquisitions as a barometer of IPO health.
[+] [-] tornadoboy55|9 years ago|reply
[+] [-] GuiA|9 years ago|reply
Sony has had some designers that just get it over the decades, but sadly they're all over the place. Weird Sony is amazing - see http://www.theverge.com/2013/9/29/4783132/the-amazing-produc... .
Nintendo has also some inspired moments, but they stumble a lot.
[+] [-] angryasian|9 years ago|reply
[+] [-] 2arrs2ells|9 years ago|reply
[+] [-] wrsh07|9 years ago|reply
Also, it's a bit data intensive
[+] [-] paulddraper|9 years ago|reply
[+] [-] mattmaroon|9 years ago|reply
My 5 year target on SNAP would be roughly one can of Pringles. When the next market meltdown happens, Michael Lewis will write a great book about people buying non-voting shares of a fad company at a $24b valuation that says in its prospectus that it has no plans to make money and maybe never will.
Or I'm wrong and they won't be a fad and will figure out how to monetize, but I feel like the multiplied probabilities of both make it as clear a bet as you ever get.
[+] [-] nikcub|9 years ago|reply
Further, if anybody had actually followed any of the short advice that has been given in HN comments in the past 10 years, they almost certainly would have lost unlimited amounts of money.
If you really want to put your money where your mouth is, post some bitcoin, a term period and a price target and see if anyone takes you up one it. I'd almost certainly book everything you offer on SNAP going to $0 in 5 years.
[+] [-] jforman|9 years ago|reply
The vast majority of their revenue is still from AdWords despite those billions being spent, but that GOOG pie's only grown over time.
[+] [-] simantel|9 years ago|reply
[+] [-] eanzenberg|9 years ago|reply
[+] [-] bdrool|9 years ago|reply
Assuming you are talking about this sentence from the "risk factors" section of their S-1:
> We have incurred operating losses in the past, expect to incur operating losses in the future, and may never achieve or maintain profitability.
That's relatively boilerplate and doesn't really mean much. The "risk factors" section is always very gloom-and-doom to avoid the appearance of over-promising returns. For example, Workday said "we have a history of cumulative losses and we do not expect to be profitable for the foreseeable future" in their risk factors. Shake Shack included "our inability to open profitable Shacks" as a risk factor in their S-1. Google listed pages and pages of "risks" that basically boiled down to "advertisers might stop using us". It's really not that unusual to say something like that.
You might be right and Snap could be headed for a big fall, but that statement alone isn't much of an indicator.
[+] [-] econner|9 years ago|reply
What does this sentence mean?
[+] [-] unknown|9 years ago|reply
[deleted]
[+] [-] fullshark|9 years ago|reply
[+] [-] empath75|9 years ago|reply
[+] [-] lettersdigits|9 years ago|reply
'feeling like' is not a good way to convincing me to short something. nor long. nor anything ;)
> ..., but I feel like the multiplied probabilities of both make it as clear a bet as you ever get
So you 'feel' like it would be a 'clear bet' ? sounds like a big maybe to me.
How about NOT shorting/longing at all ? I feel like this is the clearest bet for me ;)
(edit: spacing)
[+] [-] chollida1|9 years ago|reply
One one hand raising as much as possible is very nice for the company but to temper that sentiment I think it was Robin Li, the Baidu founder, who made the comment that while he was very happy with the first day pop his stock had, it was an actual curse.
he was prepared to run an XX Billion dollar business and hit his targets but with the opening day pop he was now running a 2X Billion dollar business and that made things significantly harder than if the stock had risen gently over the course of 4-8 quarters.
I wish the Snap team well, but they'll have a few hiccups coming.
They've been private long enough that a deluge of shares will come free trading this year and they'll at some point have to do the tight rope walk of switching from telling wall street to look at user growth to looking at profits.
If you want to invest I'll quote someone sitting beside me. "The problem with Snap is determining if they are more Twitter or Facebook."
From a wall street perspective this IPO was a bit different. It was about 10x oversubscribed, which is alot but not uncommon. What was interesting was that alot of mutual funds got almost full allocations and hedge funds were shut out compared to what they would normally get.
Maybe this is a good thing?
[+] [-] brangalinafoeva|9 years ago|reply
[deleted]
[+] [-] philfrasty|9 years ago|reply
[+] [-] notadoc|9 years ago|reply
Valuation at 60x 2016 revenue with no profit? Oh boy.
Aside from that, who uses Snapchat?
[+] [-] zachrose|9 years ago|reply
Their first product wanted to challenge the permanence of our digital stuff. (Forget the underlying technology.)
The glasses are about challenging this kind of Google/Apple model of the person as some elegant cyborg from the Jetsons. They offered a toy for, like, just goofing off.
I imagine users like it because it's not crammed with ads and spam yet.
$24B is about half of what it costs to build high speed rail from LA to SF, or a third of what it might cost for a manned mission to Mars.
Compared to what it probably costs to operate and develop, $24B sounds redonkulous. Compared to those other projects, it's hard to see what Snap has that's so rare.
Maybe the better comparisons are Nike (market cap $95B) and Coca-Cola ($182B). Snap is using near-commodity economic inputs and outputs to express a point of view and build a brand.
All of this is speculation from my deep crater of ignorance.
[+] [-] owenversteeg|9 years ago|reply
For those who don't know (and I don't know much) Whatsapp just launched a stories feature, similar to Instagram or Snapchat.
[+] [-] exolymph|9 years ago|reply
Neither of these sentences is accurate.
[+] [-] askafriend|9 years ago|reply
FB have effectively copied the stories feature across all of their media properties (FB/WhatsApp/Instagram). I'd imagine they'll eventually add the ability to cross-post selectively.
[+] [-] trungonnews|9 years ago|reply
[+] [-] bostik|9 years ago|reply
This kind of number strongly implies that one can expect the immediate post-IPO valuation to be quite a bit higher. However, once the aggressive stock flippers are done, there's no telling where the stock price finds its equilibrium.
0: https://www.bloomberg.com/view/articles/2017-03-01/snapchat-...
[+] [-] nimos|9 years ago|reply
[+] [-] bherms|9 years ago|reply
[+] [-] albertwang|9 years ago|reply
Source: https://support.robinhood.com/hc/en-us/articles/115000902306...
[+] [-] pcurve|9 years ago|reply
Trying to wrap my head around why this is any different than Twitter.
[+] [-] elsewhen|9 years ago|reply
http://aswathdamodaran.blogspot.com/2017/02/a-snap-story-val...
[+] [-] soVeryTired|9 years ago|reply
[+] [-] ChrisArchitect|9 years ago|reply
[+] [-] symlinkk|9 years ago|reply
[+] [-] knd775|9 years ago|reply
[+] [-] nooron|9 years ago|reply
[+] [-] unknown|9 years ago|reply
[deleted]
[+] [-] quickben|9 years ago|reply
The most important thing is the non voting shares. Big money will be staying away from that IPO.
[+] [-] curiousgal|9 years ago|reply
Edit: I meant 0 value as in 0 added value. See mrweasel's comment below for more details on the second point.
[+] [-] askafriend|9 years ago|reply
[+] [-] skewart|9 years ago|reply
A lot of people think there will be a big shift in brand advertising away from TV and towards the internet (brand advertising is aimed at general awareness about a brand and forming positive or desirable associations with that brand in people's minds). Snapchat is very well poised to capture a lot of brand advertising money if this shift happens in the next several years. Not only do they have a large, highly-engaged user base, but also brand advertisers are often especially eager to reach younger consumers who are just beginning to form impressions of brands.
Of course, there are a lot of "if"s in all of that. But they do have a clear path to bringing in massive revenue if everything goes well.
[+] [-] accountface|9 years ago|reply
Say what you will about valuations in general, but Snapchat is rare in that they've produced a physical product and set some sort of future goal in hardware (specifically cameras). So If everyone else gets a C, I'd at least give them a C+.
[+] [-] grenoire|9 years ago|reply
[+] [-] TYPE_FASTER|9 years ago|reply
[+] [-] j-walker|9 years ago|reply