My Thoughts on Snap's IPO

1 March 2017
1 Mar 2017
2 min read

With the IPO of Snap1 tomorrow, I thought it would be useful to examine both the Bull and Bear case.2 Snap has been a divisive company since the beginning, and never more so after the S-1 filing document was released. Below are a few bullet points for why the company could either succeed or fail.

Bull Case:

  • They have executed flawlessly so far. This post by Ben Thompson 3 describing Snap’s product strategy (termed laddering up) is worth reading in it’s entirety.
  • I find that they currently have a majority of mindshare with the teen demographic. Much of communication that I see among teens in the United States happens over Snapchat.
  • The management team maintains all of the voting rights for Snapchat. If you think the CEO Evan Spiegal is a product visionary, his control over Snapchat will not change after the IPO.
  • They’re cool and continue to innovate.4

Bear Case

  • The S-1 document shows that Snap has an increasing cost per customer, while revenue per consumer is mostly flat. This puts them in a bad position, making it difficult to turn a profit.
  • Facebook is actively trying to crush Snap and has been for awhile. After a failed acquisition attempt, Facebook tried to clone Snapchat twice. After those attempts failed, Instagram copied the story functionality from Snapchat wholesale, causing Snapchat’s growth to crater.
  • To add insult to injury, Facebook is now testing similar functionality in the Facebook App.
  • Snap’s entire strategy is based on out maneuvering the competition. If Spiegal somehow misses a trend and someone else can capitalize, thatcould spell doom for the company.

There is no wrong choice here. On one hand, Spiegal is a one of a kind product visionary and it makes sense to believe that he and Snap will continue to succeed. However, Snap is facing a challenge with Facebook’s blatant duplication of Snapchat’s core features. No matter what happens, it will be interesting to see if Snap can succeed or if market forces sink the company.


  1. Most notably creators of the ubiquitous app Snapchat [return]
  2. For those that are unaware, the bull case would be the best case scenario, or reasons to believe that Snapchat will be okay. The bear case is the opposite, which would be the reasons for pessimism. [return]
  3. Often cited here, always interesting. [return]
  4. Snapchat’s newest product, Spectacles, has intrigued me from the beginning.
    [return]

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