Snap, the photo app your rude teen nephew used before moving onto something called Kik and then another thing called Fam, wants to be the next Facebook. Astute observers will note, however, that there already is a Facebook called Facebook. Moreover, Facebook already has a Snapchat called Instagram and another, more recently, called WhatsApp. It's going to be a fun IPO.
But for those who live in a marvelous fantasyland where Facebook doesn't exist, boy, has Goldman got a bridge some pre-IPO shares to sell you. From Business Insider's Rachael Levy, who talked to a guy:
Goldman Sachs, one of the lead banks on Snap's initial public offering, estimates that revenues for the social-media company could hit nearly $2 billion in 2018. That's nearly five times last year's sales.
[...] Snap is on the road this week meeting investors and a key question is how much the company, whose Snapchat app is known for its disappearing photos, can grow its user base. Goldman estimates that the company could grow its daily average users to 221 million in 2018, up from 158 million late last year
Goldman's numbers assume the daily active users metric to grow by about 4.3 percent quarterly over from 2016 to 2018. That's a conservative number when compared to the double-digit quarter-on-quarter growth that Snap has racked up in years past. But it would mark an acceleration from the fourth quarter of 2016, which saw daily active users grow by just 3.2 percent.
Snap blamed the dip in part on technical glitches, but there's plenty of reason to point the finger at the clone of Snap's Stories feature that Instagram rolled out in August. TechCrunch reported that the move helped depress view counts by as much as 40 percent for Snap celebrities. One talent manager warned that “Snapchat is making some of the same mistakes as Vine.” In perhaps the most worrying sign, DJ Khaled, hip hop's Stuart Smalley, has implored his Snapchat fans to migrate over to his Instagram.
The revenue picture is a bit murkier. Snap has been relatively cautious in pushing ads on users, and analysts are optimistic about the high engagement times among target demographics – 30 minutes a day amongst 20-year-olds, according to Snap. Even so, quintupling revenues in just two years while fending off the Death Star of the tech economy is a tall order. (For comparison, Facebook's revenue only doubled between 2011 and 2013.)
Presumably, Goldman is selling investors on the idea that Snap's impressive record of innovating and hooking users can top Facebook's even more impressive record of gobbling up innovations and making users clinically addicted. And maybe that's a good bet! People had the same qualms about Google eclipsing Facebook as the latter approached its IPO. Google Plus, we hardly knew ye.
But downplaying Facebook's existence is a tall order. Snap opens its IPO filing with the declaration “Snap Inc. is a camera company.” Given the credulity Goldman assumes of potential Snap investors, one has to wonder how many of them might take that statement literally.