Snap, the company known for being the creators behind Snapchat and Spectacles, is set to debut on the stock market this Thursday at a price of $17 a share. It’s been rumored for some time now that the company would be valuing itself at over $20 billion, but today’s announcement that each share will be available for $17 values the company at a total of $24 billion, with over $3 billion in shares being put on offer. Now, while the company is remaining optimistic about the money it will raise, as well as its future, the company has a number of big obstacles ahead.
The company is yet to earn any profit, but the worrying part is that most of the company’s revenue comes from Snapchat. The app still has a pretty large user base, but its growth is slowing down and the number of active users using the service is also declining. This is due largely to Facebook who, not only have launched a Snapchat-style feature in the form of Instagram Stories, but have also launched Facebook Stories and the recently launched WhatsApp Status. All three of these features, which all offer the same to users, are included in their respective apps, therefore removing the need for a standalone app such as Snapchat. While WhatsApp Status and Facebook Stories are yet to take off completely, though, Instagram Stories has undeniably experienced large growth and is slowly stealing some of Snapchat’s most loyal users. With the majority of Snap’s revenue coming from Snapchat, though, the growth that competing services are experiencing, as well as the fact that they are slowly eating into Snapchat’s user base, is surely a worrying sign for Snap.
Although the majority of the company’s revenue comes from the app itself, the company does have plans to expand its horizons, specifically by turning itself into a photography-focused company. Spectacles offered a unique product to consumers, but haven’t experience mainstream success as of yet. The company is said to also have other products in development such as drones, which is why the company is looking to raise so much money, but it’ll remain to be seen if the company can produce another successful before Snapchat’s revenue streams decline significantly. Essentially, tomorrow’s IPO listing could either be the beginning of the end or the beginning of a new era, the outcome depends on how quickly Snap can adapt to the market and Snapchat’s slowing growth.