After months of rumour and speculation, photo-sharing app
Snapchat has filed documents for its Initial Public Offering (IPO) - estimated
at between $20 and $25 billion. Despite being a household name, amazingly,
Snapchat has yet to make a single dollar in profit, losing over $500 million in
2016 and over $300 million the year before. Offering a free service with no
assets and a huge discrepancy between revenues and value, Snapchat represents
the changing face of a new and very different economy.
Snapchat is a simple idea in theory, an evolution of texting
with a unique and powerful twist. While Facebook and other social media
applications are all about preserving data and organising it in a timeline,
Snapchat allows users to "show and share things that they do not want to
last on the internet as a permanent record." The basic premise of the
service is for content to vanish once consumed, with Snapchat managing to build
something extremely valuable out of content that disappears almost instantly.
As the most anticipated floatation since Facebook became a
public company in 2012, the Snapchat IPO has massive implications for the
future of online business. With over 158 million daily users and revenue
growing by 600 percent last year alone, Snapchat seems destined for great
things. Facebook themselves have become increasingly concerned about the growth
of Snapchat, offering CEO Evan Spiegel $3 billion for the company just two
years ago. While Spiegel was initially derided for turning down the offer, he
is now being lauded for his balls-of-steel as his company is valued at ten
times that amount.
Snapchat represents the latest mutation of capitalism, as
the production and consumption polarity continues to split wide open. Companies
like Facebook and Snapchat can create value before they have significant assets
or revenue streams, and in the case of Snapchat, even without data. Instead,
the Snapchat IPO describes a "camera company" with a focus on
building revenue through advertising: "In the way that the flashing cursor
became the starting point for most products on desktop computers, we believe
that the camera screen will be the starting point for most products on
smartphones ... Our ability to succeed in any given country is largely
dependent on its mobile infrastructure and its advertising market."
Snapchat is not the only company taking advantage of this
new and exciting economy, with other free services also managing to disrupt the
traditional business model. Instead of treating people like consumers and
taking their money at the gate, the new economy presents an illusion of
inclusivity as people produce and share their own content within a network.
Real-world services such as Uber and Airbnb are based on a similar premise,
with the size of the network providing scope for value as services and
advertising are implemented over time. The new economy is more concerned about
our attention than our money, with versatile networks and useful services
created over time as the money flows in through the back door.
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