Ignore the pessimists: Why I'm bullish on Snapchat's IPO

 
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The web, as we know it, is becoming increasingly visual and image dominated. (Source: Getty)

Today could see the official start of the biggest tech IPO in history.

Snapchat will finally announce the price per share it will be seeking for its long-awaited public offering. If the social media giant gets the valuation it’s rumoured to be expecting, a whopping $25 billion, its IPO could end up dwarfing even Facebook’s and Google’s.

Yet, such a high valuation has understandably raised a lot of eyebrows, not least given Snapchat’s reported 2016 net loss of $514m and lack of clarity around how it will create a sustainable advertising model.

These are legitimate questions. But we’ve been here before.

Just like with the naysayers during Facebook’s IPO, these pessimists were wrong then, and they’ll be wrong with Snapchat: Facebook’s shares, despite the initial issues over its IPO and questions around its advertising model, have nearly quadrupled since.

Snapchat has every chance of enjoying similar growth over the next five years and what will drive this is a trend impacting all digital media currently. The web, as we know it, is becoming increasingly visual and image dominated. Just take a look at Buzzfeed or Mashable to get a sense of how text based media is gradually being relegated online in favour of image-based ones.

And thanks to Snapchat and Instagram, sharing photos is becoming more and more common in person-to-person interactions. Facebook and Twitter have both followed the dominant photo-sharing sites by announcing their own photo messaging services.

All this is leading to the build-up of a staggering amount of visual content online. More than three billion images are posted or uploaded to the internet daily, a number always increasing. This is no doubt aided by smartphone penetration, which in the UK now stands at 81 percent, rising to 91 percent for those aged 18-44 years old.

The opportunity for Snapchat, and for brands in general, is to use all this image-based data online to create new ways of connecting with customers and speaking to them in the digital language they increasingly understand: images.

One technology that will be crucial in allowing them to do this is image recognition. This burgeoning type of software is already allowing companies to analyse millions of images and videos online, looking for any that might contain a particular product or brand logo (a Starbucks coffee cup for example) and using this data to serve relevant visual ads alongside the content or send special offers to consumers.

Snapchat, with the massive volume of images and videos shared on its platform every day, is perfectly-positioned to take advantage of this new approach to digital advertising and build a powerful and sustainable image-first ad model.

In preparation, Snapchat is beefing up its tech capabilities. Last July, it was revealed the company had patented image recognition technology to recognise multiple different objects and serve consumers more relevant filters, coupons and of course ads.

Google, Microsoft and Twitter too have been muscling in on the action by investing heavily into image recognition technology, research or integration into their platforms as they too seek to keep up in the race for this technology.

So, while the valuation sought by Snapchat’s owners on Wednesday may seem a little steep, if you look at the wider opportunities emerging in our increasingly image-first world, you start to get a sense of the real opportunities.

The old saying goes that a picture is worth a thousand words. From today, we might need to start looking at it differently: "350m pictures shared daily are worth $25bn."

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

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