Dive Brief:
- Snapchat announced that Morgan Stanley and Goldman Sachs Group will lead its initial public offering expected for next March according to Bloomberg. JPMorgan, Deutsche Bank, Allen & Co. are also involved.
- The IPO could potentially value Snap Inc., the newly named parent company of the Snapchat social media app, as high as $25 billion.
- A high-value IPO would fill Snapchat's coffers with cash it could invest in infrastructure while also suggesting renewed interest in tech stock by investors following a cooling off period.
Dive Insight:
Reuters reports that Snap began describing itself as a camera company in September, with an announced hardware product of glasses with a built-in video camera.
The shift to hardware taking Snap beyond the popular social media app was one of a number of moves the company has been making in order to become more attractive to investors. Before the announcement about the glasses with an embedded camera, investors expressed concerns that Snapchat’s only revenue stream was advertising. On that end, Snapchat has made a number of moves to become more advertiser-friendly after a long-standing policy of not serving its youth-heavy user base with what the company described as “creepy ads.”
Although the app launched in 2012, it only began offering ad units on the app last October. And initially its ad units, such as sponsored lenses, were mostly one-day affairs at high rates compared to other social media platforms. Brands still took advantage of advertising on Snapchat if for no other reason than to reach its audience that skews toward millennials and Gen Z.
Until around mid-year Snapchat didn’t offer marketers with targeting and measurement tools that social media advertisers have come to expect, but that has been changing as the company began preparing for an eventual IPO with the need to provide investors with a reason to take part in the offering. Since that time it has been rolling out new targeting options, new ad formats and even added executive staff with digital measurement experience.
“Snapchat’s UX has always felt light on settings, tutorials, analytics, and for its early users, that’s been part of the appeal. If Snapchat is eyeing a potential IPO anytime soon, it makes sense that they’d be looking to beef up and solidify their revenue streams,” Corbett Drummey, CEO of content marketplace Popular Pays, previously told Marketing Dive.
