Snap is two things - 1) a new mobile communication platform that puts the camera and the microphone (rather than the keyboard, mouse and browser) at the center of everything and 2) an advertising company combining their platform technology with strong creative to deliver advertisements that work for both the viewer and the brand.
Here are the other key points:
- Positioning - Snap unabashedly claims to be "a camera company." They don't really mean it but it's their headline claim.
- What Snap really is picture, image and video processing company with great design. Their revenue model is advertising.
- Their approach generates much higher engagement and better targeting than others. It's also very "sticky" with advertisers.
- There are three classes of stock so Evan Spiegel and Robert Murphy will retain control of the company. (Like Facebook and Google.)
- They use Google Cloud as infrastructure instead of AWS and have committed to spend $2B on Google Cloud over the next 5 years. (why?)
- Revenues last year were $404M versus $53M in 2015.
- The operating loss for 2015 was a hard-to-process $514M. You read that right the lost $514M on revenues of $404M. But you know....you have to believe!
- Global quarterly active daily users were 158M in Q4 2016. Up 48% YoY. Quarterly average revenue per user was $1.05 globally and $2.15 in the US.
The cool part:
Snap takes over the phone and turns it into a camera-centric communication platform. Then they add layers on top like "lenses" that you can apply to your image. Other layers like geo-filters work the same way. They have added short videos (stories) and saved snaps (memories) to the platform. This image conveys a sense of how Snap "takes over" the phone and turns into a platform.
Users get hooked on using the layers to have fun and communicate. Then Snap works with advertisers to create sponsored lenses, geo-filters and ads. As an example here is one from Starbucks included in the S-1. Now you want a Frappuccino don't you?
Based on what they are it's no wonder that Facebook is a little scared. One of the biggest risks for Snap is how fast Facebook is reworking Instagram to be more like Snap.
We'll have much more to say when the final S-1 drops and the roadshow begins. Stay tuned and be sure you are on our email distribution list.