Snapchat, the photo sharing social media service, has become elevated to the same plane as other social media behemoths like Twitter (News - Alert), Facebook and Instagram. The daily active user base of Snapchat is continuing to grow, and Snapchat has been constantly updating its features and expanding its reach. Now, Snapchat seems prepared to capitalize on their growth. A report in the Wall Street Journal indicates that the company is preparing for an initial public offering (IPO) in this coming March at a valuation of $25 billion.
Extreme popularity is not enough to turn a social media platform into a billion dollar company, as the recent struggles of Twitter have illustrated. But, Snapchat is seen as such a valuable commodity because of its great capability with advertisers. This year alone, the app is expected to generate $366.69 million in ad revenue. Next year, that figure is expected to more than double to $935.46 million.
“Advertisers are attracted to Snapchat for its broad reach among young Millennials and those in Generation Z, which are valuable demographic groups for many businesses,” says Cathy Boyle, principal analyst at eMarketer (News - Alert). “To engage those often hard-to-reach consumers, Snapchat has expanded its advertising portfolio over the past year to include a wider array of video ads and more sponsored geo-filters and sponsored lenses,” she continued.
Snapchat has done a great job of realizing who they are, who primarily uses their app, and ways that that user base can be leveraged. They realized that it is overwhelmingly millennials who are using their app, and recognized that this demographic is the one most sought after by advertisers. They then devised a way to leverage their platform for advertisers, and were able to sell ad space and generate hundreds of millions of dollars. Snapchat has shown that they are capable of reaching millennials with advertising, and that skill comes with a $25 billion valuation.