Menu

Ahead of Snapchat’s initial public offering (IPO) debut on March 2nd, Brand Finance, a brand valuation consultancy, has suggest that Snapchat’s brand value, estimated to be $1.7 billion, is overvalued.

The London-based consultancy said Snapchat’s brand valuation is just 8 to 9 percent of the company’s value range of $19.5 billion to 22 billion. Snapchat’s brand value also failed to make Brand Finance’s list of the 100 most valuable tech brands, despite the fact that tech company’s upcoming IPO is expected to be the 4th biggest in the industry’s history.  

“Brand Finance has valued the Snapchat brand from first principles. The brand value is relatively low because of low revenues and margins and an unproven ability to monetise the platform substantively,” said David Haigh, Brand Finance’s CEO. “Snapchat has made its name by delivering posts which are here one minute and gone the next. Its users appreciate its ability to make their photos disappear, but over-excited investors certainly won’t feel the same about their cash.”

Founded in 2011, Snapchat is an image messaging and multimedia application created by some former students at Stanford University led by Evan Spiegel. The app’s main feature is self-deleting messages – the messages are available only for a short time. The app has over 150 million users worldwide mostly among teenagers and adults in their twenties.

According to Brand Finance, the top five tech brands in the world are Google, Apple, Amazon, Microsoft and Facebook. Earlier this month, Brand Finance announced that Google’s brand value rose 24 percent (from $88.2 billion to $109.4 billion) during 2016, overtaking Apple to become the most valuable brand not just in tech but across all sectors.

Twitter’s brand value, however, fell 39 percent year-on-year to $2.5 billion owing to slow user growth and lack of impressive financial results. Apple’s brand value also fell by $38.7 billion as optimism around its ability to innovate and sustain revenue growth wane.

“Apple has struggled to maintain its technological advantage, with new iterations of the iPhone delivering diminishing returns, while the Chinese market is now crowded with local competitors such as Huawei,” Haigh said. “Apple has been living on borrowed time for several years by exploiting its accumulated brand equity. This underlines one of the many benefits of a strong brand, but Apple has finally taken it too far.”

Brand Finance said Chinese tech brands are performing particularly well. Alibaba’s brand value nearly doubled to $34.8 billion as the company explores opportunities to both open up and simplify commerce for Chinese communities, particularly rural ones. Alibaba is now a major sponsor of the Olympic Games, joining other top sponsors such as McDonald’s, Coca-Cola and Visa.

WeChat – which has over 850 million users – grew its brand value to $13.2 billion given that it offers a more extensive range of services, than any comparable brand, from mobile payments to video games and text messaging to video sharing. As a result, the Chinese firm is far more embedded in the daily life of its average user, even replacing work emails for many Chinese, Brand Finance said.