Billion Dollar Unicorns: Snapchat Experimenting With Revenues
Sramana Mitra
Founder and CEO of One Million by the One Million (1Mby1M) Global Virtual Accelerator
I have never understood the idea behind venture capitalists driving multi-billion dollar valuations for companies that keep struggling with finding a successful revenue model. One such story is that ofBillion Dollar Unicorn player Snapchat, which has seen their valuations skyrocket while still experimenting with a viable monetization opportunity.
Snapchat’s Revenue Experiments
Of late, Snapchat has been exploring with various options to generate revenues. Last month, they released their first in-app purchase that allows users to buy replays. Prior to the release, Snapchat allowed users to replay one message per day before it disappeared. With the latest release, users will now be able to buy one replay of three messages per day for $0.99. After the replay, the chat will, however, disappear. The new feature is expected to keep Snapchat ad free, but analysts believe that the replays are probably too pricey. Snapchat agrees, but defends the move by saying, “They’re a little pricey, but time is money! ”. Currently, Snapchat has more than 4 billion clips messaged daily on their platform and attracting users to replay a chatappears to be easy money. The move does take Snapchat away from its primary offering of being an ephemeral chat service as a chat can now be replayed, albeit once, before it vanishes.
Earlier this year, Snapchat also introduced Snapchat Discover, a feature that allows news and entertainment companies to reach out to Snapchat’s audience. They have tied up with companies like CNN, ESPN, and The Food Network to offer sources of news, sports videos, and micro television channels for their audience. Each channel is refreshed daily, keeping in line with Snapchat’s ephemeral idea. Snapchat as a media has become so popular that earlier this month, Comedy Central decided to launch new shows on Snapchat.
They are also experimenting with emojis and are enabling users to unlock Trophy emojis that are unlocked after certain milestones. For now, they don’t appear to be selling these trophies.
Snapchat also continued to acquire companies. Last month, they announced the acquisition of San Francisco-based Looksery for an estimated $150 million. Looksery uses facial recognition technology to deliver special effects on photos in real-time. Snapchat leveraged the acquisition to release a new Lenses feature in their app that allows users to add special effects to the selfies that they send to their friends.
Snapchat’s Financials
Snapchat’s moves appear to be helping them generate revenues. While they do not disclose financials, reports project that they will end 2015 with nearly $50 million in revenues. Revenues are expected to grow to $200 million by next year.
Meanwhile, valuations have continued to soar. Snapchat remains venture funded with $1.2 billion in funding from investors including Alibaba, Fidelity Investments, Glade Brook Capital Partners, York Capital Management, August Capital, Yahoo!, GIC, Kleiner Perkins Caufield & Byers, Coatue Management, Tencent, SV Angel, Benchmark, General Catalyst Partners, Institutional Venture Partners (IVP), and Lightspeed Venture Partners. Their last round of funding was held earlier this year when they raised $537 million in a round that valued them at $16 billion. Last December, they had raised $485 million at a valuation of $10 billion, growing significantly from the December 2013 valuation of $2 billion.
How a sub $50 million company, heavily oozing losses, can be valued at $16 billion, beats me.
More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book, Billion Dollar Unicorns. Unicorns will also be discussed with some special guests during our 1M/1M Roundtable programsover the next few weeks. To be a part of the conversation, please register here. The term Unicorn was coined in a TechCrunch article by Aileen Lee of Cowboy Ventures.
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Northeast Regional Operations Manager
9 年Philsabine.acnibo.com
CEO/Founder: NETWORK-X? & MULTIPLEX? OTT Video Content, Blockchain, Tokenization, Content Acquisition, Content Discovery, AI, ML Strategy | Technology & Business Model Solution Development | Consumer & Audience Advocate
9 年Well sort of (I guess), but it's really about what the market will bear. You get a high valuation or as high as you can. Then the next investor is either going to raise that valuation because all the prior "fundamentals" (if you can call it that), are there, and now your even better funded than before the prior funding, so technically the valuation "should go up" or that's one theory). But to what degree, is debatable. You basically just shop the previous valuation and ask that no one attempt to go below it at least. So you try to drive it up and in some cases they randomly seek to acquire capital without regard for how much is actually needed. But you give away the least amount of equity in return, because in time, a venture capitalist can own or at least control your company because you undervalued the proposition. But in reality those are the extremes and people rarely find that balanced valuation (collectively). Once again, one objective is to be in control of your entity. But there are all kinds of negative side effects from that in the long term, like your Board of Directors is stacked to protect one individual or even a venture capitalist's interest. It's basically a big tug-of-war that takes different forms over the years.
Mimecast Co-founder, Board Member, and retired CEO.
9 年An interesting test would be to look at the value per share of the lowest ranking share class in various 'company valuation' scenarios. These potentially inflated values are derived from the value paid for the small number of newest shares that no doubt come with extensive downside protection (and that downside protection is paid for by the lower ranking share classes in exchange for a PR worthy valuation number). Usually the valuation realized by the original shareholders in most real life scenarios ends up looking modest.
Helping sales teams with customized insights and analysis for those who plan, buy, or sell media.
9 年Ahhh i am starting to get this VC stuff i think. It's the amount of money you raised x a multiple of that raised $$$$. So if you raise 100 Million and you get a 3x valuation for your Unicorn your company is worth $300 Million.