Cautious response to imminent appearance of Snapchat owner on stock market
Social media giant Snapchat's imminent appearance on the stock market should come with some "warning stickers", industry analysts have said.
Snap Inc, the parent company of the photo-sharing app, has filed documents announcing its plans for its IPO (initial public offering), the move that signals shares in the company will be available to sell on the US stock market.
The announcement has been much anticipated and is likely to be one of the largest ever in the technology industry, with the company expected to raise around three billion dollars (£2.4bn) and be valued at between 20 and 25 billion (£16-20bn).
However, Snapchat has never made a profit, and Richard Holway of TechMarketView says Snapchat's success story is far from complete.
"Snapchat has 158 million active daily users but only managed a 3% growth in Q4," he said.
"This is less than 10% of Facebook's active users and less than a third of Instagram users. Both are still growing faster.
"Snapchat appeals to the younger teenage user. It has yet to break into the mainstream - meaning older users."
Mr Holway also pointed to losses of 515 million dollar s (£412m) in 2016 as a reason to stay cautious, something Snap Inc acknowledged in its IPO filing, stating the company expected " to incur operating losses in the future, and may never achieve or maintain profitability".
The increased competition from Facebook and its various apps by mimicking some of Snapchat's core features has also been flagged - most notably the Stories feature where users tell the story of their day through photos and video, which recently appeared on Instagram.
"The only real USP that Snapchat has over other social media is that its images disappear quickly," he said.
"Not that I have ever used it, but apparently it is very popular for sending explicit pictures. But the feature is easy to copy.
"Indeed Instagram - owned by Facebook - recently introduced Instagram Stories and has immediately attracted 150 million users."
In response to this pressure, Snap Inc also moved into hardware last year as part of a pivot into a "camera company" rather than just the Snapchat app.
The firm released Spectacles, camera-equipped glasses which can be used to capture images and video that can then be added to a user's Snapchat Story.