Dive Brief:
- Michael Lynton, CEO of Sony Entertainment, is stepping down in order to become chairman of board for Snap Inc., parent company of Snapchat, according to reporting by Forbes.
- Lynton and his wife were early investors in Snapchat after watching their daughter adopt the social media app and he has served on Snap’s board for four years. He assumes the board chair in advance of Snap Inc.’s expected IPO in March, which analysts are currently pegging at around $25 billion.
- Per the Wall Street Journal, Snapchat founders Evan Spiegel and Bobby Murphy will retain 70% of Snap's voting power post-IPO while pre-IPO investors will receive less powerful voting shares.
Dive Insight:
In a bid to build out value ahead of its initial public stock offering, Snapchat has recently been inking deals for exclusive content with a variety of media partners, including Disney and Turner. Lynton brings a wealth of entertainment experience to the startup from his position at Sony and might help Snap develop a better line of strategy to new offerings like original series.
But while Lynton could advise Snap on how best to approach media creation and distribution, co-founders Spiegel and Murphy are retaining an unusual amount of control, even for a tech company, as the Journal points out. Sources told the Journal that investors will earn no voting power for shares purchased in the IPO, suggesting that Spiegel and Murphy might have a particular vision for how they want to build out their brand once flush with more cash for R&D. Hardware like Spectacles might be one avenue the company is pursuing, while more robust original content is shaping up to be another.
Snap's IPO has a lot of hype to live up to at the moment, being one of the largest in years. If a success, it has the potential to revitalize the entire VC space, which raised more cash last year than it had since 2001 even as investment in startups was down. There are, however, major challenges Snap still has to overcome, namely in providing better ROI for the brands and advertisers that support its content model and figuring out a plan to retain a youth-centered audience as the app matures past early adopters.
Snapchat has undergone dramatic changes in the past 12 months, with a host of new marketer-friendly features such as beefed up measurement and ad targeting capabilities and expanded ad formats to appeal to wider range of budgets. All of these moves help marketers reach Snapchat’s youth-heavy user base, and also contribute to the app's revenue streams, making Snap more attractive to potential investors.
