• by Sean Hargrave , Staff Writer, February 8, 2017

Feel free to call me a Gen X dinosaur -- I've been called far worse, and to be honest, the insult would probably be about right. But is anyone else looking at Snap and thinking, "wait a minute!"?

It could just be me, because I have this crazy old, pre-digital obsession of companies making a lot of money and then deciding to float so they can expand and make another heap of cash for shareholders as early investors take an opportunity to go "liquid" on their initial punt. Floats are great for this because they give a public price for each share a wise investor bought up when the company concerned was working out of a garage. The trouble is that they have to offer the people buying those shares something too. It has to be the start of the next phase, not the ending of the initial phase where the early birds catch their worm.

This, for me, was where the problem always existed with Twitter. It was widely overhyped and never delivered a penny in profit. As long as you and I make it to the commute home tonight, we will deliver our families more profit in a single afternoon than Twitter has over several years, despite the ($30bn, was it?) price tag it floated on. As it turned out, as you probably could have guessed, the figure was a pipe dream. Snapchat's $3bn float suggests a similar valuation of between $20bn and $25bn. Is it worth mentioning again that this is a company that hasn't actually delivered a dime in profit yet?

On the plus side, user numbers are certainly looking good. In the UK alone, Snapchat is believed to have doubled in subscriber numbers to 11m during 2016, and eMarketer is predicting that another couple of million will sign up this year, meaning that roughly one in three smartphone users will be on the platform. 

There are two huge questions hanging over it. The first is that no matter how Snapchat might innovate, it can just end up complaining that Instagram nicked its latest ideas. Whatever it does, its nearest rival will happily do as well with seeming impunity.

The other question -- and it's the elephant in the room here -- is that if Snapchat has so many users, why isn't it already making a massive heap of cash? In 2015 its revenues went up seven times to just over $400m a year. If that's not enough to turn a profit, what is?

And that kind of brings us on to a third question, which is kind of just asking the first and second question at the same time. What exactly can Snap do to attract budget away from Facebook/Instagram and Google, the two giants of digital media? Anything it originates, Instagram has just to follow and it no longer has an advantage. Surely its one chance of success is that it is a third choice -- an alternative to the unrivalled power of those two tech giants? Making advertisers less dependent on the same two big names is almost certainly its best chance for success.

The problem for me is that massive valuation over its head. It's right up there with Twitter, and while I'd back Snapchat to make more money than Twitter in the long term, it will have to invest a printing press for the green stuff to stand up to the hype.

I am looking at the valuation -- I'm looking at a company that has yet to return a profit to shareholders, and I'm left scratching my head. I think I'm happy to be labelled a dinosaur and await to be pleasantly surprised.