I'm not sure I'd compare Snap with Twitter. Twitter has essentially flat-lined. Snap has only been monetized for a little over a year now and has at least demonstrated that they're capable of bringing in revenue, based on their ~$350M in 2016 and $1B 2017 projection. They're just beginning and I think they'll find more ways to capitalize on their large user base in the future.

I see your point - but when Twitter went public, they were still growing, and their valuation was lofty, based on expectations of considerably more growth.

Snapchat is in possibly a weaker situation: they are not making any money - and in order to justify their valuation, they really do have to grow for a long period of time.

I believe that Snap is 'similar to Twitter' in that Snap will not become like Facebook - i.e. 'ubiquitous and incumbent'.

I believe that Snap will likely 'hit a wall' in growth at some point.

The greater risk is that Snapchat may be a fad.

Twitter 'was a fad', but when the hype died down - they are still kind of a broadly usable tool for media, celebs - Tweets are used extensively in reporting coverage. This gives a lot of stickyness to the platform.

Snap ... is the 'zen cool' thing for 18-26 year olds ... but that could change very quickly. There's no reason that their user base can just switch to FB messenger (where everyone else is), SMS or whatever to do 'regular communication' when they are too old to be 'sharing irreverent stories'. And the 14-year-olds today, when they turn 18-ish may have some other cool thing to do.

So if we can separate the 'fad' and 'utility' parts of the platform - Facebook has a good deal of 'utility' that applies to a very broad base. Twitter has some 'utility' to a narrower base.

I'm weary that Snapchat just doesn't have the kind of 'utility' that it needs to survive after the 'fad' dies down.

That said, they have been good at innovating and 'staying cool'. A lot of brands manage to 'stay relatively cool'. They could adapt/evolve into something consistently cool, or consistently useful. Possibly. But there's nothing on the roadmap that says they would.

Which is why I think there is risk in this.

> but will never use Snapchat as it is today.

Snapchat is completely covered in sponsored content now. Unless you have dozens of people you follow, ads make up the majority of the experience.

But users do not realize it and they are happy. All of the ads prove some value to the user (Discover, Our Story...)

Please, what are "subs" and "$/sub"? I haven't heard of these. Thank you.

'sub' is the business shorthand for 'subscriber'.

$/sub is revenue per subscriber.

$/sub, sub growth, 'cost of acquisition' of each sub, (and assumptions about margins) is what 95% of the valuation is based on.

Now that they are 'going IPO' they're not going to be judged so much on 'lofty ambitions' and 'intangible market opportunities' - they are going to be judged mostly on 'how much free cash flow' they can generate over time.

So, $/sub (minus the cost to acquire each sub) and some assumptions about operating margins gives you the how much free cash flow per customer they can expect. This is widely different on different platforms.

Sub growth tells you how many customers investors can expect over time.

Hence profits.

Obviously it's very crude, and there's a lot more to it - but that is the most essential, basic economic equation that investors will look at to determine a valuation.

Snaps $/sub right now is negative at the 'net' level - i.e. after R&D, etc. - but the key metric people will be interested in is the 'gross' revenue (and profits) per subscriber. The idea being - one day, 'R&D' costs will stop growing so much, and customer base will still grow quite a lot. R&D and Operational costs are spread over an ever increasing user base, which will put the per-subscriber net margins into the positive.

Thank you.

Subscribers and dollars per subscriber.