Snap Inc. is focusing more on user engagement data than monthly active users, and independent estimates show Snapchat makes about $1 in ad sales for each user, compared with $16 and $8 for Facebook and Twitter, respectively.

(Bloomberg Gadfly)—Snapchat isn’t a public company yet, but it is already making its first smart move to divert the scrutiny of pesky public stockholders.

Sure, there’s parent company Snap Inc.’s decision to bring in a new set of stock owners that won’t have even the appearance of a say in how the company operates. A potentially bigger deal is Snapchat’s apparent decision on what yardsticks of business success it will emphasize—and which ones it may shy away from.

Snapchat is stressing to its bankers, and potentially to IPO investors, a string of numbers that show how people are using the mobile app, including how much time its addicted users spend hanging out there and how many of them use features such as tags that mark people’s Snapchat photos or short videos with their location.

These are useful facts to know about Snapchat, and if such numbers are disclosed to public investors it will be a surprising dose of transparency for a company known for its hyper secrecy. But the metrics can also do double duty as corporate diversionary magic—look at this shiny object over here!—to flood investors with handpicked metrics that paint the company in the best light and distract them from its monthly user count, which has become a sometimes harmful fixation for many social media and internet companies.

For Facebook Inc., its monthly active users, or MAUs, is the golden measure. Its 1.8 billion MAUs are proof of its power to fixate one-quarter of the world’s population at least once a month. YouTube, WhatsApp and Facebook are members of the Billion User Club, and joining their ranks is a signal a company is part of the global internet elite.


Snapchat so far has captured the hearts and leisure hours of young people in the United States and some other countries, but it’s an open question whether daily video diaries will become an enduring habit for a billion or more people worldwide. (To be fair, the same question was asked about Facebook.) It’s not even clear whether it’s Snapchat’s goal to join the elite club.

By stressing numbers other than monthly users, Snapchat hopes it can avoid the same treadmill that has wrecked Twitter Inc.: The company’s value rises or falls—mostly falls lately—based on whether its monthly user count can continue to grow. The company’s focus early in life on how many people use Twitter each month meant that once it grew clear Twitter wouldn’t join the Billion User Club, the company instead entered internet loser land.

Snapchat sidesteps the question if it stresses how avidly its smaller but engaged users are, and how much Snapchat can grow as it squeezes in more marketing pitches to its app users. Revenue growth should be a breeze because Snapchat is just starting to dial up its advertising sales. The company now makes roughly $1 in ad sales for each user, according to a Gadfly calculation based on eMarketer revenue estimates and Bloomberg Intelligence user figures. Facebook and Twitter are at $16 and $8, respectively. In its first years as a public company, Snapchat will be a winner with investors if it closes this gap to other internet companies.

As we wait for Snapchat to formally start its road to an IPO, two questions loom: How will the IPO go? And will Snapchat prove lasting, or will it become the next MySpace? The answer to the first question will probably be just fine or great. There has been a vacuum of buzz-generating internet companies debuting on public markets, and investors will most likely be eager to dine at the Snapchat stock buffet.

The second question is impossible to answer. No honest person can confidently predict which internet shooting stars will persist and which ones will fizzle. But the first step to enduring internet life is to start off as a public company with achievable goals for the short to medium term. And Snapchat is making sure investors look at it in the most flattering light.


This column does not necessarily reflect the opinion of Bloomberg LP and its owners.