Snap says the open internet is important to its success

Snap says the open internet is important to its success

Net neutrality. Because so much of what people do on Snapchat — send high quality videos and pictures — requires lots of bandwidth, the company favors net neutrality. That’s the idea that all data on the internet is treated equally, and no company or website gets special treatment. But Net neutrality could fall by the wayside under President Donald Trump.

Control. Even if Evan Spiegel or Bobby Murphy is terminated from the company, they’ll “continue to have the ability to exercise the same significant voting power,” and potentially still control stockholder decisions. The company also says neither co-founder can take on the duties of the other, and it wouldn’t be easy for Snap to quickly find a suitable replacement.

Charity. Snap has been operating a new charity, the Snap Foundation, since the beginning of this month (yes, a whopping two days). The company and the co-founders have each pledged that after the IPO they’ll donate up to 13 million shares of their Class A common stock to the foundation over the next 15 to 20 years. The group will support arts, education and youth.

Ad dollars. “Substantially all” of Snap’s revenue comes from advertisers, but it doesn’t have long-term commitments from most advertisers despite recent efforts to set up such deals. There’s not a single advertiser or content partner that accounts for more than 10 percent of Snap’s revenue. Many of its advertisers just started working with the company and spend only “a relatively small portion of their overall advertising budget” with Snap.

Michael Lynton, CEO of Sony Entertainment, said last month that he’s leaving Sony to become chairman of Snap’s board full-time.

Google Cloud. Talk about frenemies. Google is listed as a competitor — partly because of YouTube — but it’s also an ally. Snap relies on the search giant’s cloud service for storage and bandwidth. The company said it made a $2 billion deal with Google over five years to use its cloud service.

The competition. Other big competitors (who are sometimes friends) include Apple, Facebook (and its Instagram and WhatsApp businesses), Twitter, Kakao, Line, Naver and Tencent. “Many of our current and potential competitors have significantly greater resources and broader global recognition and occupy better competitive positions in certain markets than we do,” Snap warned.

Instagram. Snapchat called out Facebook-owned Instagram for ripping off its marquee feature, Stories, which lets users post a string of videos and pictures that disappear after 24 hours. Instagram Stories “largely mimics” Snapchat’s own feature, and it “may be directly competitive.” Yeah, we can see that.

The media. Snap warns that negative media coverage could affect its brand, and therefore the success of the company. The company has already had its share of bad press, including a lawsuit from an ousted co-founder. Basically, Snap’s message to the press: Please don’t write bad stuff about us.

Growing team. The company has 1,859 employees, up 600 over the past year. And that’s just the beginning. It plans to add to the head count “rapidly” through hiring and acquisitions. That’s where the $3 billion it hopes to raise will come in handy.

Originally published Feb. 2 at 5:17 p.m. PT. 16 at 2:42 p.m. PT: Added Snap’s revised valuation, per an update to its SEC filing.

Updated Feb

The board. Michael Lynton, one of Snap’s earliest investors and the CEO of Sony Entertainment, is the board’s chairman. He announced last month he’s leaving Sony to work at Snap full time. Of all the company’s non-employee directors, only one of them is a woman. That’s Joanna Coles, chief content officer of Hearst Magazines. She’s also appeared as a mentor on “Project Runway.” Make it work.

It also could hurt Snap

Brexit. The UK’s plan to leave the European Union isn’t just causing turmoil for Europeans. The company plans to base “a significant portion” of its non-US operations in the UK, and it has licensed a portion of its intellectual property to its UK subsidiary. “No assurance can be given about the impact of the outcome, and our business, including operational and tax policies, may be seriously harmed or require reassessment if our European operations or presence become a significant part of our business.”

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