Did The Snapchat IPO Narrative Just Get Scarier?

 Did the Snapchat IPO narrative just get scarier following Snap Inc's pre-IPO roadshow?

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Snap Inc, the company that owns the popular ephemeral messaging service Snapchat, has occupied centerstage lately as the company seems headed for what could be one of the biggest tech IPOs of our times. And as you'd expect, with Snap Inc's management team meeting the investor community in New York, more information is coming under the scanner. While Snapchat's growing success over the years has made the Snapchat IPO as interesting as it has become, there's still much debate about whether you should buy into the IPO at all. Fresh news has emerged since our previous coverage of the Snap Inc IPO, which evaluated Snap stock following its toned down valuations. And now the question is, did the narrative just get scarier? Let's find out.

What's hurting Snapchat's user growth?

Well, there are at least two different theories, and there's no easy way to tell which of the two is scarier. First, let's look at the one that's probably being spoken about much more - the one that attributes the decline in user growth to Facebook's (Nasdaq:FB) Instagram. Instagram, the popular photo sharing app, got its very own version of the "Snapchatty" Stories feature in August last year. For all practical purposes, Instagram basically copied the concept, name included, from Snapchat. And, at least partly by virtue of its significantly larger user base, Instagram turned the feature into a roaring success on its platform. So much so, that its engagement numbers dwarf those of Snapchat's.

Very recently, Facebook CEO Mark Zuckerberg announced that Instagram had taken its Daily Active User (DAU) tally to 400 million. That compares with Snapchat's significantly smaller DAU base of 158 million. Clearly, Instagram, with its much larger user base, was in a better position to promote the Stories feature, and that's exactly what it did, apparently. As per recent estimates, about 150 million DAUs on Instagram used its adapted 'Stories' feature, which compares with Snapchat's tally of ~40 million DAUs. And possibly because the launch of Stories on Instagram coincides with the decline in user growth on Snapchat, observers like Josh Costine of TechCrunch, have opined that "Instagram Stories is stealing Snapchat’s users". Well, he's not alone. A lot of prominent voices seem to concur with Costine's opinion. Besides, it's not the least bit surprising or hard to believe.

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Disclosure: Neither Amigobulls, nor any members of its staff hold positions in any of the stocks discussed in this post. The author may not be a ...

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