Snapchat’s stock is worth about one-third the value of it’s opening day trading price. The shares ended their first day of trading, March 2, 2017, at $24.48 per share. The market cap at that price was around $33 billion (CNBC). As of right now, the price per share is $9.17, and the market cap is $11 billion (MarketWatch). The decline has been steady, and more dramatic than gradual relative to most IPOs. But hey, it’s the highly anticipated tech market, so is it really that surprising?
The question now is whether Snapchat will continue to fall, or can it rebound?
Despite all of the social media out there, there are only a few giant companies that come to mind that are listed on the US public market. Here are a few (with their current price per share/market cap):
- Facebook: ($163.48/$463.33 billion)
- Twitter: ($29.52/$22.37 billion)
- Match: ($59.25/$16.41 billion)
A lot of the other big name social media companies never went public, but instead, they were bought by other companies. Here’s that list with their purchase prices:
- Vine bought by Twitter for $30 million in 2012
- Myspace bought by News Corp. for $35 million in 2005
- Linkedin bought by Microsoft for $26.2 billion in 2016
Half of these companies could be seen as complete let downs (even though, overall, they were great successes). The reason they were let downs is that they were initially, relatively highly valued, and they have fallen in value since. Here’s the list of the let downs:
- Myspace sold for $35 million in spectacular fall from $12 billion heyday (The Guardian).
- Twitter‘s stock is worth less than half of what it was worth in January of 2014.
- Twitter just shut down Vine 4 years after buying it for $30 Million (Adweek 2016).
The other half of the noted companies have risen in value:
- Facebook has quadrupled in value since it’s IPO.
- Match has nearly quadrupled in value since it’s IPO. (However, it’s market cap is currently below Twitter’s market cap).
- Linkedin was bought for way more than Vine and Myspace, and the purchase price was higher than Twitter’s, Match’s, and Snapchat’s current market caps.
Although, all of these companies have been very popular at one time or another, I think there are two major differences between the winners and the losers.
First, the winners have more substance to their social media platforms and provide the best service in their fields:
- Facebook connects the world as the leading personal life profiling service.
- Match is a leading dating platform designed for meaningful dating (and meaningless dating as it own’s Tinder).
- Linkedin is the leading career profiling service.
Second, the winning companies with continued success figure out ways to generate more revenue:
- Facebook makes most of it’s money using several different forms of advertising, which you can see in businessmanagementdegree.net‘s article here.
- A Forbes article explains that Linkedin makes money through advertisements and subscriptions here.
- Match collects fees from memberships and other paid features, which is described in Business Insider‘s article here.
So it appears the more specific question for Snapchat is, first, will it provide a substantial service that provides the best service in it’s field, and, second, will it it figure out how to generate more revenue? Snapchat currently makes most of it’s money through various forms of advertising, like sponsored filters (Money Morning), which Facebook shows can be a profitable method. However, a possible opinion could be that Snapchat will fall by the wayside, as it could be argued the platform is just a fad app, like Vine. Also, another possible opinion could be that the company was doomed once it offered a platform that could be used just as a service to streamline paying for nudes (Vice).
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