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Snap – Netscape On Steroids?

By Shlomo Maital

snap

On August 1995, Wall St. witnessed a near-miracle.   A company called Netscape Communications, maker of the first widely-used Internet browser (given away for free) did an initial public offering of its shares.

     Here is what happened: “The stock was set to be offered at US$14 per share, but a last-minute decision doubled the initial offering to US$28 per share. The stock’s value soared to US$75 during the first day of trading, nearly a record for first-day gain. The stock closed at US$58.25, which gave Netscape a market value of US$2.9 billion.”

     That defying-gravity IPO showed Wall St. it had a sure-fire way to print money – issue shares of dot.com companies, and watch the manic rise print profits for insiders. The bubble burst in 2000/1, and then came a bigger collapse, in 2007/8.  

   Fast forward to the remarkable IPO of Snap Inc. (Snapchat, photo messaging company).

   “Snap shares closed their first day of trading up 44 percent at $24.48 a share, quenching a long drought in the market for tech IPOs.  More than 200 million shares — the entire size of the offering — changed hands over the course of the day, accounting for roughly 10 percent of the total volume of trading on the New York Stock Exchange on Thursday. The stock opened shortly before 11:20 a.m. on Thursday in New York, and started trading at $24 a share, rising 41.2 percent from its pricing at the open. The company, trading under the ticker SNAP, priced its public offering at $17 a share on Wednesday.  Share prices rose as high as $26.05,  and fell as low as $23.50.  The opening price of $24 puts the company’s market capitalization at about $33 billion, about the size of Marriot and Target. Twitter’s market cap is about 11 billion, while Facebook’s is about $395 billion. The young ephemeral photo messaging company posted a $515 million loss last year.

So, a company that lost over half a billion dollars last year is valued by the market at $33 b., equal to the valuation of a huge hotel chain, profitable, or a huge retail chain, also highly profitable.

     Here we go again.

Snapchat: Think Differently

By Shlomo Maital  

  snapchat

Snapchat Founders: Bobby Murphy, Evan Spiegel

     Stanford University undergraduates Bobby Murphy and Evan Spiegel had an unconventional observation about social media – one that made them billionaires.

     “What makes a social network valuable?   In the Facebook era, everyone believed they became valuable by amassing more and more users. Obvious, right?  

     But Spiegel noticed, that in real life, most of us spend more of our time with just a few friends, whose value outweighs huge numbers of looser ties. So from their Stanford dorm rooms, they made Snapchat an app that would send DISAPPEARING photos and images, n a way that “more closely mimicked the dynamics of a real world conversation” (See Katie Benner, NYT, Feb 3).   It would raise the appeal of Snapchat as a service that people used with a small number of good friends.

     And were they ever right!!   Snapchat is now close to an IPO, and it will be valued at billions of dollars.

     It’s not just that the two founders practiced ‘think differently’.   They did think differently, but in a way that appealed to the way we live, think, interact and chat with friends.   Think differently is fine, but it has to be focused, built on solid foundations of the way people behave, and the way we observe people behave.

   Innovator — check out social media, and innovations in general. Can you think different? Can you alter the basic principles, so that the device or service more closely matches the way we behave in the real non-digital world? If so, you can be the next Snapchat startup moguls.

   

Blog entries written by Prof. Shlomo Maital

Shlomo Maital
June 2017
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