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What Matters and What Doesn’t in Snap’s S-1

The first stage of Snap’s roadshow for investors is set to begin after the public release of its S-1, detailing its IPO offering, which could happen by the end of this week. The subsequent pitch to investors will rely both on the user growth, engagement, and financial figures (some of which The Information has learned, including last year’s revenue), and a less tangible argument that it isn’t a social media company, but a different beast entirely.

Notably, Snapchat has roughly 160 million daily active users, said a person with knowledge of the figure, up 23% from about 130 million at the end of the first quarter of last year. But the user growth in the second half of last year was slower than during the first half. The company already has disclosed that 60 million of its daily users were in the U.S., or close to one-fifth of the population, as of last fall. 

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MATTERS: Infrastructure Costs Per User. Because Snap is a data-heavy company, it pays a large server bill to Google Cloud Platform every year. The company’s Cost of Revenue line item will give a clear picture as to how much the company has to spend in order to serve each user. When Facebook went public, it was spending around $1 per user on infrastructure costs. Most recently, that figure was around $2 or $3 per user. If Snap is already around that level, it could remain a significant cost center that bedevils attempts to break into profitability.

—Cory Weinberg contributed to this report.

Shawn Wang and Roger McNamee commented on this article.
Read comments from top tech and industry leaders
Evan Spiegel
Evan Spiegel
CEO, Snapchat
Chamath Palihapitiya
Chamath Palihapitiya
Founder & Managing Partner, SocialCapital
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Marc Andreessen
Co-Founder, Andreessen Horowitz
Jonah Peretti
Jonah Peretti
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Adam D'Angelo
Adam D'Angelo
CEO, Quora
Brit Morin
Brit Morin
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Dustin Moskovitz
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Christina Miller
Christina Miller
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Max Levchin
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Adam Mosseri
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Alex Mather
The Athletic
Martha Josephson
Martha Josephson
Partner, Egon Zehnder
James Murdoch
James Murdoch
Co-Chief Operating Officer, 21st Century Fox
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Andrew Kortina
Founder, Venmo
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Ruchi Sanghvi
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Part of Mr. Spiegel’s argument is that Snap can avoid growth for growth’s sake and instead maximize revenue from its concentrated group of users