The Strategist

Snapchat Was Discounted by 25%

11/11/2015 - 14:22

Investment fund Fidelity has reduced estimated value of the messenger Snapchat by 25%. Analysts believe that so far, the company failed to convince investors of their bankability.

US investment fund Fidelity, which is one of the main shareholders of the online service Snapchat, lowered the estimate of its share in the project by 25%, reports the Financial Times. Just in June this year, the investment fund estimated the messenger of $ 30.72per share. However, the figure was $ 22.91 by the end of the third quarter.

A reason for this decision remains unclear. Fidelity itself gave no comments on the Snapchat’s assessment reduction. Yet, observers attribute this step to general mood of investors in relation to technological start-ups. For example, last Friday on the eve of its own public offering, remittances service Square praised itself at $ 3.9 billion, while investors estimated it at $ 6 billion last year. Companies such as Thumbtack, OfferUp, Beepi and have reduced their estimated value, too.  

Snapchat, in turn, has long been trying to prove its financial attractiveness to investors. Initially, the company's only asset was a completely free application for instant messaging. Therefore, the company did not extract any profit for itself. To reverse this situation and attract investors, the Snapchat management introduced a number of paid functions for its messenger, and started signing advertising contracts, including with Coca-Cola and Samsung.

In November last year, the company announced a feature Snapcash, which allowed users to transfer money to each other by a simple message within the service. In an attempt to attract more users, the company launched Discover - joint information project with a number of media publications such as National Geographic, ESPN and BuzzFeed. However, so far Snapchat have been failing to convince investors that the platform is inviting to advertisers, and therefore can bring profits. CEO of the advertising agency Dentsu Aegis Network Nigel Morris said: "They have great potential, but still it is too early to talk about something definite. I think they have not yet figured out how they can make a variety of brands stay on their platform."

Snapchat was launched in 2011. The service’s schtick is that it allows smartphone users to exchange text messages, photos and videos, available for viewing for up to ten seconds. Then, they simply disappear. In November 2013, Snapchat rejected a Facebook’s offer to buy the service for $ 3 billion. Previously, Facebook had tried to buy Snapchat for $ 1 billion. Mr. Spiegel, one of the project’s founders, said then that his service will continue to gain in popularity, and thus its presumable cost will increase along.