Snapchat

The parent company of messaging app Snapchat is moving ahead with an initial public offering, reporting fast-growing revenues but slowing user growth as it seeks to raise as much as $4 billion.

The offering, for which Snap Inc. filed registration papers last week, is expected to be one of the largest in U.S. history, valuing the company at around $25 billion.

According to the SEC filing, revenue, which comes from advertising, soared to $404.8 million in 2016 from just $58.6 million, with revenue per average user increasing to $1.05 from 31 cents.

But growth in daily active users of Snapchat slowed to 5% in the last three months of 2016, compared with 11% in the year-earlier quarter. In 2009, when Facebook’s daily user count was roughly the same size, its quarterly user growth was at a roughly 30% pace.

“We anticipate that the growth rate of our user base will decline over time,” Snap warned in its filing. “If we fail to retain current users or add new users, or if our users engage less with Snapchat, our business would be seriously harmed.”

According to The Economist, how well Snap “fares as a public company will also serve as a litmus test of whether it is possible to prosper in the shadow of digital behemoths like Facebook and Google.”

“The competition against Facebook and Google (which owns YouTube, an online-video site, against which Snapchat will directly compete for ad dollars) is unlikely to let up,” The Economist added. “Facebook tried to buy Snapchat for $3 billion in 2013, and has since then copied many of its popular features.”

Last year, Facebook launched Instagram Stories to compete with Snapchat and the feature already has 150 million daily users. The dropoff in Snapchat “occurred at the exact time when Instagram Stories launched,” TechCrunch noted.

Snap’s filing indicated that it intends to sell stock valued at $3 billion but the Los Angeles Times said that number could change. Executives including CEO Evan Spiegel and early investors will hold all of the voting power in the company.

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