Snapchat may have been built on disappearing messages, but as the social media darling hovers on the cusp of becoming a public company its parent is trying to show how durable its business is.
In its first public prospectus, Snap disclosed that it had built a nearly $US405 million ($529 million) advertising business in just over two years. While the filing does not indicate a price for an initial public offering, Snap is expected to seek a market valuation of more than $US20 billion from investors.
The pitch is straightforward: Snap is one of technology's biggest success stories of late, and it is heading to the public markets amid a relative dearth of noteworthy offerings.
Still, company executives are expected to face questions about whether Snap can maintain its enormous growth rate, particularly as Facebook's Instagram unit copies many of Snapchat's major features. Potential investors may question the slowing growth rate of daily users, though Snap is likely to argue that it will continue to add new products that will accelerate growth.
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The filing formally pulls back the curtain on Snap's meteoric growth. From 2011 to 2012, the number of people using the Snapchat app every day grew to 1 million from 1000. By the end of last year, an average of 158 million people were using the app daily.
The average user opens the app more than 18 times a day, according to the prospectus, and the service's users send more than 2.5 billion messages and images each day.
Snap demonstrated in the prospectus that its business model is viable. Its annual revenue grew by about seven times in just a year, to $US404.5 million last year, from $US58.7 million in 2015.
Martin Sorrell, chief executive of advertising conglomerate WPP, recently estimated that his company spent $US90 million on Snapchat last year. He called Snap a "rogue elephant," even as WPP deployed $US5 billion to Google and $US1.7 billion to Facebook in 2016.
"I would say Snapchat is the one thing that people look at and say, 'Maybe that's a third force that can counter the domination,'" Sorrell said last month, speaking at a conference held by Citigroup.
Started in 2011 in a Stanford dorm room, Snap has grown from a curio for millennials into a broad social phenomenon. The start-up, founded by Evan Spiegel and Bobby Murphy, was originally built for users to send self-destructing photographs and messages to their friends.
But Snap's ambitions have risen over time. It introduced ways for users to compile "stories" about their days and innovative filters that can transform faces to look like dogs or monsters — or, crucially, branded content like Taco Bell tacos.
"When we were just getting started, many people didn't understand what Snapchat was and said it was just for sexting, even when we knew it was being used for so much more," the company said, employing what is surely one of the few uses of the word "sexting" in a regulatory filing.
While generally seen as a social media company like Facebook and Twitter, Snap declared in its prospectus that it "is a camera company."
And indeed last year, Snap introduced a line of camera-equipped sunglasses, Spectacles, which help funnel even more user content onto the platform. Snap also created Discover, allowing media companies to post content onto their own channels on the service.
Who's going to be a billionaire? The biggest winners of Snap's IPO
One of the more reliable paths to becoming a billionaire over the past 20 years has been to build a dominant technology company and then to take it public. That trend has led to Google billionaires, Facebook billionaires and a whole class of mere multimillionaires too.
So who will be the ones to walk away the wealthiest from the coming public offering of Snap?
The filing revealed some of the individuals and investors who have the most to gain from a successful market debut. We calculated the value of their stakes based on the fair market value of a share of Snap at the end of last year, when it was $US16.33.
Here are some of the winners:
EVAN SPIEGEL
Spiegel, 26, was a founder of the company and now serves as Snap's chief executive and is a member of the board. According to the prospectus, he owns 227 million shares of the company, a stake that was worth $US3.7 billion at the end of last year.
His regular compensation package was nothing to sniff at either. In 2016, he was paid $US2.6 million, including $US503,205 in base salary, a $US1 million bonus and $US901,635 in other compensation, which covered his $US890,339 personal security budget.
BOBBY MURPHY
Murphy, 28, helped found Snapchat when he and Spiegel were fraternity brothers at Stanford University. Murphy is now Snap's chief technology officer and a member of the board.
Like Spiegel, Murphy owns 227 million shares of the company, which were worth $US3.7 billion at the end of last year.
IMRAN KHAN
Khan, 39, is a former investment banker who is now Snap's chief strategy officer.
Khan owns 2.8 million shares of Snap, which were worth more than $US46 million at the end of last year.
In 2016, Khan was paid a salary of $US241,539 and a bonus of $US5.2 million, as well as additional stock compensation of $US14,658.
TIMOTHY SEHN
Sehn, 36, is Snap's senior vice president of engineering. He owns almost 7 million shares of Snap, which were worth $US110 million at the end of last year.
In addition, Sehn's 2016 base salary was $US400,152 and his bonus was $US1 million. He received a $US40 million stock award last year as well.
BENCHMARK
Benchmark, widely regarded as a premier Silicon Valley venture capital firm, invested in Snap in 2013 when the start-up was still known as Snapchat and was valued at $US60 million to $US70 million. The investment was spearheaded by a Benchmark partner, Mitch Lasky, who sits on Snap's board.
According to Snap's prospectus, Benchmark owns 131.6 million shares of the company, a stake that was worth $US2.1 billion at the end of last year.
LIGHTSPEED VENTURE PARTNERS
Lightspeed was the first venture investor in Snap back in 2012, a year after Snapchat was launched. Jeremy Liew, a Lightspeed venture capitalist, led the investment.
So how has that bet fared? According to Snap's prospectus, Lightspeed owns 86.6 million shares of the company, which were valued at $US1.4 billion at the end of last year.
MICHAEL LYNTON
Lynton, 57, the former chief executive of Sony's entertainment division, has long been a mentor to Spiegel. He announced last month that he would be leaving Sony to focus on Snap as a director and chairman of the board. Mr. Lynton owns 3 million shares of Snap, which were worth $US49.3 million at the end of last year.
The New York Times
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