Snapchat has made all its money to date from digital advertising. But as investors prepare for an upcoming IPO, they have to consider what the parent company Snap will look like in a very different business.
There's not much subtlety to it.
"Snap Inc. is a camera company," says the front page of its website. "We believe that reinventing the camera represents our greatest opportunity to improve the way people live and communicate."
Last month, Snap introduced Spectacles, sunglasses that allow users to take 10-second videos and quickly share them with friends. They're expected to start selling within months for $130.
Based just on its core business of delivering immersive ads inside its social media app, Snap's revenue is predicted to jump almost fivefold by 2018 to $1.76 billion, according to eMarketer. While Snap still appears to be burning quite a bit of cash, growth numbers like that from a software-based company suggests enormous future profitability.
Facebook, after losing money in 2007 and 2008, turned profitable in 2009 and two years later generated $668 million in net income on $3.7 billion in revenue.