As you’re no doubt aware by now, Snap Inc – the company formerly known as Snapchat – has filed for an IPO, expected to value the firm in the $20-25bn (£16-20bn) range.

Going public has been on the cards for Snap for a while now, building on an enormous year for the company. 2016 saw Snapchat solidify its reputation from ‘that app kids use to send rude pictures’ to ‘serious threat to Facebook’s dominance’.

It drew huge audiences – and brand partners – for its Super Bowl and Olympic Games coverage; got serious about advertising with the release of improved targeting capability, app install ads and its long-awaited ads API; moved into hardware for the first time with Spectacles; and finally capped it all off with a rebrand.

Just in case there were any lingering doubts about Snap’s status at this point, you need look no further than seemingly every other move by Facebook and Instagram. It’s a tradition which stretches all the way back to 2014, when Facebook introduced Slingshot, a self-destructing photo messaging app – which later pivoted to something closer to Snapchat’s Stories feature, and was eventually shut down in 2016.

Since then Facebook has acquired facial image recognition startup FacioMetrics for its ability to overlay real-time ‘lens’ filters onto live video; tested geofilter-style ‘Camera Effect’ frames; and reportedly started work on its own version of Snapchat’s Discover section and sponsored AR ‘selfie masks’, as part of a rumoured camera-centric redesign of the entire app. Meanwhile, Instagram introduced a feature for photo and video messages that delete after two views, and Stories, which even lifts its name from the Snapchat function.

Well, they do say the imitation is the sincerest form of flattery.

Used – and abused
Interestingly, figures from Snap’s IPO filing suggests that the last of these rival features did make an impact. Growth of Snapchat usage slowed dramatically following the launch of Instagram Stories. In Q2 2016, the app saw its daily active users increase by 17.2 per cent quarter-on-quarter. The next quarter, after Instagram had introduced the feature, that slowed to seven per cent and, by year’s end, 3.2 per cent.

“The rate of net additional DAUs was relatively flat in the early part of the quarter ended December 31, 2016, and accelerated in the month of December,” reads Snap’s S-1 document. “Although we have historically experienced lumpiness in the growth of our DAUs, we believe that the flat growth in the early part of the quarter was primarily related to accelerated growth in user engagement earlier in the year, diminished product performance, and increased competition.”

It also specifically identifies the likelihood that “our competitors may mimic our products” as a risk to the company’s growth.

On the other hand, the filing also gives us the clearest picture yet of Snapchat’s user numbers. In Q4 2016, it averaged 158m daily, compared to 107m a year earlier. By comparison, Facebook attracted 1.23bn DAUs in December, as reported in its Q4 results earlier this week, and Instagram 400m. Twitter doesn’t break out DAUs, but its monthly average currently stands at 313m.

And that’s just the tip of the numerical iceberg.

Money talk
As you’d expect, the filing also provides a look at the state of Snap’s finances, showing it pulled in revenues of $404.5m in 2016 – up hugely from the previous year, when it made $58.6m.

“Substantially all” of those figures comes from ad sales. Last year, 91 per cent of ads were sold by Snap directly rather than through partners, up from 87 per cent in 2015. That’s good news for the company, given direct sales aren’t subject to partner revenue shares – which, according to Re/code, saw it pay out $58m last year.

Like many young tech companies, Snap is failing to translate those revenue figures into profits. It made a net loss of $514.6m in 2016, and $372.9m in 2015.

So where is all that money going? Well, in part, acquisitions. In April 2015, Snap paid $79.4m for Looksery. Its acquisition of Bitstrips last March cost $64.2m. During 2016, it also acquired an unnamed ‘mobile search company’ for $114.5m, which lines up with reports of its acquisition of Vurb, and all outstanding shares of a ‘computer vision software company’, most likely Seene, for $47m.

Snap currently has 1,859 employees, over triple the amount it had at the end of 2015, and says “we expect to continue to expand our team at a rapid pace through hiring and acquisitions to support potential future growth”.

We dont care about the old folks?
The filing also dives deeper into the behaviour Snapchat’s daily users, who use the app 18 times a day, spending around 25-30 minutes on average.

Snapchat acknowledges the divide here between its younger and older users. For over-25s, those averages drop to 12 times a day and 20 minutes, while under-25s are boosting the average at 20 times and over 30 minutes.
The company identifies that gap as a potential risk to its future wellbeing.

“The majority of our users are 18-34 years old,” the S-1 document reads. “This demographic may be less brand loyal and more likely to follow trends than other demographics. These factors may lead users to switch to another product, which would negatively affect our user retention, growth, and engagement. Snapchat also may not be able to penetrate other demographics in a meaningful manner.”

“I wouldnt invest”
“Based on Snapchat’s announcement this morning, I personally wouldn’t invest,” Steven Bartlett, co-founder and CEO of social media marketing agency Social Chain, told Mobile Marketing. “Currently Snapchat doesn’t feature in much of our marketing plans, as it has been a closed platform before now. In the past, Snapchat was based on peer-to-peer relationships and because of this, growing a community has previously been difficult. This is due to the fact that there was no way of sharing or discovering new content within the platform.

“Commercial forecasts for 2017 suggest that Snapchat’s Ad platform currently stands at $1b, compared with Instagram’s $2.8bn. And with a recorded viewer drop of 30-40 per cent since it removed AutoPlay, this could be a key trigger behind an unusually early IPO. Nevertheless, this could turn out to be Snapchat’s smartest commercial decision to date.

“For the platform, there is definitely a huge amount of marketing value from the likes of its geo-filter and Discovery offering. However, I believe some of its recent add-ons have fallen by the wayside a bit. Take for example its Memories feature, a way to save and share old snaps. This is contradictory of the whole disappearing images business model, which Snapchat has built its entire empire upon. That being said, there is obviously a place for Live Stories in modern society – it has quickly become the new status update.”