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Report: Snap Inc., ready to compete with social media giants, prepares IPO

Snap Inc. is preparing its initial public offering for early next year, further solidifying the company's competition with rivals such as Facebook and Twitter.

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Snapchat chief executive officer Evan Spiegel poses for a photo in Los Angeles.

Jae C. Hong/AP/File

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As other social media companies such as Twitter and Facebook struggle to retain users and increase advertising revenue, one newcomer to the scene has been steadily growing and preparing to compete with the giants.

Snap Inc. is the parent company of Snapchat, which burst into the scene five years ago to surprising success. In September, it announced its forays into hardware – and now, according to a new report, the company is preparing for a potential initial public offering next year.

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The IPO could value the company at $25 billion or more, becoming the largest IPO since Alibaba, the Chinese e-commerce giant, went public in 2014, sources told The Wall Street Journal. Its most recent valuation, in May, placed it at $17.81 billion, and it received $3.1 million in advertising revenue for the first 11 months of 2014, Reuters reports. 

“We’re like a camera company,” Bryan Kim, the manager of Snapchat’s strategy group, told eMarketer. “And we encourage creativity, which is why there are so many creative tools on our platform – doodles, geofilters, stickers and lenses.”

Marketing research firm eMarketer predicted that as many as 58.6 million US consumers will use the app at least once a month in 2016, representing 28.3 percent of US smartphone users. More double-digit user growth will come in the next two years, eMarketer projects.

Many credit the rapid rise of the company to its novel idea of users sending messages in the form of filtered images, videos, and text that disappears once the receiver sees it. This has since expanded to curated, user-generated “Snap” stories, and publisher-created content made specifically for the platform. As new features attract more users, Snapchat poses tough competition for Twitter, whose growth has been more stagnant. 

The dominance of the company in social videos, particularly popular in the age 18-24 demographic, puts it ahead of its competitors, but Instagram and Facebook are teasing launches of similar features to Snapchat.

In August, Instagram launched a “Stories” feature that allows users to post photos or videos in a slideshow that will disappear in 24 hours. Even chief executive officer Kevin Systrom admitted it’s nearly identical to Snapchat Stories, saying that they deserve the credit.

And earlier this month, Facebook started testing “Messenger Day,” a feature in its Messenger app that allows users to share filtered images and videos that disappear after 24 hours. In 2013, the site offered $3 billion to buy Snapchat, but was turned down by Snap's chief executive and founder, Evan Spiegel. 

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Snap Inc. is not holding back. The company has plans to venture into hardware, where Facebook and Google already have strongholds in the form of virtual reality headsets, phones, and other products. The parent company, which was rebranded from Snapchat last month, is starting with Spectacles – a pair of sunglasses that captures shareable Snapchat-style videos from a first-person perspective. But the company certainly doesn’t plan to stop there.

“When we were just getting started it made sense to name our company Snapchat Inc., because Snapchat was our only product! Now that we are developing other products, like Spectacles, we need a name that goes beyond just one product – but doesn’t lose the familiarity and fun of our team and brand,” wrote Mr. Spiegel, the chief executive officer of Snap Inc., in a press release.