Snapchat has been petitioning ad companies for commitments in the range of $100 to $200 million ahead of its IPO.
The parent company of the popular messaging service, Snap Inc. is reportedly seeking promises from ad companies that they’ll spend a much larger sum on the service in the next year and years to come.
Snap has reportedly spoken to Publicis Group, WPP, Omnicom Group and, Interpublic Group. The amount requested is a greatly increased figure from previous ad spends, almost triple in some cases. Snap is asking companies to spend between $100 to $200 million in 2017, whereas in 2016 WPP spent $90 million on ads on the service.
According to the Wall Street Journal, the aim behind this increased demand is to potentially drive up the value of the company to $25 billion, which would provide a tremendous bonus ahead of the company’s upcoming IPO.
Snapchat currently counts its user base at roughly 150 million unique users per day, with eMarketer estimates putting the company’s 2017 ad revenue at $367 million. Snapchat runs daily features from news sources on it’s discover page and regularly incorporates sponsored ‘filters’ into it’s photo messaging novelties.
Snap Inc. is expected as early as March to go public and estimates its share prices at around $20, valuing the company at $25 billion. If the $20 share price is realised, the company would win the accolade of the biggest IPO since Facebook in 2012.
However, on Monday Trip Chowdhry, of Global Equities Research, wrote a damning note that said: “We are at the tail end of the social media boom. Novelty is giving way to fatigue,”
“Fundamental investors should avoid the IPO. Snapchat is a total junk, hyper-inflated,” reported CNBC.
In spite of this, due to Facebook and Google’s increased control of targeted advertising, many firms are expected to back Snapchat in a retaliatory move.
