Last week Snap published its S-1, the filing that US companies must make public before floating. It contained a wealth of previously private information about what is a notoriously secretive company. Some numbers were impressive: revenue multiplied by six times last year and 161 million people use the app every day. The huge annual loss, however, was less encouraging.
Given that Snap is barely five years old, and young tech companies are notoriously tricky to value, whether or not the company will grow into its rumoured valuation of between US$20 billion and US$25b ($27b-$34b) is up for grabs. But we can perhaps take a hint by looking at Facebook and Twitter, the two nearest comparisons.
Facebook's stockmarket float five years ago was a disaster, beset by technical glitches and accusations that the company had failed to adapt to mobile phone use. Within four months its share price had halved. Twitter's came the year after, and was a roaring success in its first weeks. In 2017, it's the opposite story.
Facebook put its mobile troubles behind it, and its valuation has now more than trebled as it has posted ever-growing profits. Twitter, meanwhile, saw its users flatline, losses drag on and share price slump. Last year, it tried to sell itself and failed.
Snap would argue it is nothing like Facebook or Twitter, but Wall Street likes comparisons, so it will have to put up with them. Investors would like to see a company that looks as much like the former as possible, and as little like the latter. But unfortunately for Evan Spiegel, its 26-year-old co-founder and chief executive, Snap's S-1 bears more than a passing resemblance to Twitter's.
After year five, Facebook was already making a profit; and by the time it floated, net income was at US$1b ($1.4b) a year. The year Twitter went public, it lost US$651 million ($889m), and to this day has not turned a profit. Snap lost US$515m ($703.5m) last year, and says this could continue: Its IPO document has the following ominous phrase (which also appeared in Twitter's): "We may never achieve or maintain profitability."
Of course, tech groups are often not judged on their bottom line but on growth, but here the outlook is also a little bleak. Snapchat had 161 million daily users at the end of last year, but the rate at which new ones are joining has slowed. Whereas Facebook has proved to be a service for everyone, as its 1.2 billion daily users will attest, Snapchat may prove to be more like Twitter: something that is adored by a slice of the internet population, but which fails to outgrow it.
Snap's filing last week made much of the amount of time that its users spend within the app - up to 30 minutes a day on average - and the potential to make more money from them.
Whether Wall Street is convinced is another matter. At this point, Snap's share sale looks closer to mimicking Twitter's stumbles than Facebook's ascendance.
