Since it was known that the messaging service Snapchat was preparing to go public, the company thinks it´s worth $25 billion, which clearly seem as an extremely high price for a social media network that doesn't have more than five years rolling in our lives. Given this situation, the main question is: Is Snapchat really worth this price?
Snapchat Is One Of The Most Popular And Powerful Social Media Network Sites
Believe it or not, there are reasons to think that this is actually quite a rational price when compared with other companies like Facebook or Twitter. When they went public, given the fact that the blue platform was valued over $80 billion after the first day of trading, while Jack Dorsey´s network closed the first day of trading with a valuation of $32 billion. Naturally, this is something that you need to have in mind, especially when we´re talking about a social media network that at this moment is way more powerful than Twitter and Facebook when these went public.
In fact, it is quite a surprise that such an extraordinary platform as Snapchat hasn't get public yet, given the fact that this is one of the social medias with more users, to the point in which the millennial public is totally conquered by it. Actually, this is something so threatening for its competitors that almost everyone -including Facebook, Twitter, and Instagram- has copied some of its features in order to increase its popularity.
Can Snapchat End Up Like Twitter?
Another detail to analyze in order to know if it is accurate to say that Snapchat is worth $25 billion, is to compare it with Twitter and Facebook´s market caps. While Jack Dorsey´s platform is just north $11billion, Mark Zuckerberg´s company -which is the most powerful and popular social media network- is just over $380 billion.
Naturally, this is something that might turn Snapchat´s $25 billion in something really small. The real issue is that some analyst believes that this company is likely to end up being more like Twitter than Facebook, which is practically the worst nightmare of any investors, considering that Twitter´s financial issues and leak of users are so concerning that its board members wanted to sell it last year, and there´s still some chances that this could happen in this one.
In this particular perspective, $25 billion might seem as an inaccurate valuation, since analysts suggested that Snapchat´s potential market might not be that large, considering that there are numbers that show the way in which the incredible growth of users´ numbers in 2016 has now stalled, and there are some demographics in which the users are even decreasing. Of course, Snapchat will need to justify its billionaire valuation, and given this situation, it seems to be quite difficult.
However, the main factor of this company is that its selling point is engagement, which is some kind of Holy Grail for social media networks, considering that this is the key element that makes it increase the user's number, and make them feel interested enough to stay on the platform. Naturally, this is something that Twitter never had, and the main argument of Snapchat to convince the public market investors that its valuation is more than $20 billion. Although is not known if the company will make it, it seems quite possible.