Snapchat Cited False User Numbers in Order To Boost IPO, Alleges Lawsuit by Ex-worker (yahoo.com)

A lawsuit filed against Snap Inc. by a former employee claims the company reported false growth numbers to investors in an effort to inflate its valuation. An anonymous reader shares a report: The plaintiff, Anothony Pompliano, joined the company (then known as Snapchat) as a growth lead in September of last year from Facebook. Pompliano claims the company's "institutional pandemic" of misrepresentation of its user numbers was fueled by its pursuit of a multi-billion dollar initial public offering (IPO) -- a number of prior reports have claimed the company could go public as soon as March. Snap's visual messaging app Snapchat is known for its popularity with younger millennials (aged 25 and under). Despite remaining tight-lipped about its official statistics, leaked reports put its daily active user base at 150 million (higher than that of fellow social platform Twitter). Additionally, its daily video views count hit an impressive 10 billion in April 2016. Numbers like these have had the industry buzzing over its expected IPO, with analysts claiming the company could be valued as high as $25 billion.

Comments

Unfortunately it's normal

[joboss]

I was asked to do this in my first job. It's very normal practice for releasing a new site unfortunately. However it's not usually for valuation but to get users on it. However it is a good point that it can influence that.

I prefer Twain

[s.petry]

There are three kinds of lies. "Lies", "Damn Lies", and Statistics.

Fake numbers are used so often that I simply assume a provider of any type is lying and half their numbers (at least). In addition to creating bogus (aka "test) accounts and forging numbers, companies today can go to a PR firm overseas and have them create a ton of bogus accounts for you.

Facebook claims to have more accounts than there are people with Internet access in the world, and LinkedIn claims that there are hundreds of thousands of jobs for people with my background in the SF Bay area. Hyperbole without bad intention? Perhaps. Can it cause legal issues if taken literally? Not very often.

Re:I prefer Twain

[hey!]

Fake numbers fall under the category "lies" or "damned lies". The trick to misleading with statistics is to stick to facts, but carefully selected ones.

Hmmmm

[rmdingler]

Though it's not difficult to imagine a firm would shade itself in the best possible light, it seems unlikely investors with uncommon sense would rely solely on a company's subjective self-appraisal.

Also, it needs to be asked, "What is the plaintiff's motivation? Do-gooder or axe grinder?

Users v profits

[DogDude]

Of course, the rubes buying Internet stocks these days only care about "number of users". The idea that a company actually has to earn a *profit* is not even considered by the Trumps buying the stocks.

Re:Users v profits

[hey!]

I dunno. Amazon has seldom been very profitable, but it could have been if it wanted to be. For example Amazon has wielded effective monopsony powers in the publishing wholesale market for years now. If it had merely stuck to being an online bookseller it'd have been a lot more profitable than it has been, but a lot less valuable.

If you look at the last 20 quarters of profits, clearly Amazon is run to break even when it comes to profits, but over the same period its market capitalization has grown from $81 billion to $370 billion. And it's not because investors are naive. They aren't worried about profits because Amazon revenues continue to grow.

Any time management wants it can make Amazon profitable, but at present it's spending all that money coming in on a bid to become the pre-eminent retailer of everything. When you buy Amazon stock, that's the vision you're investing in. Even if Amazon fails, what remains will likely be profitable and (this is somewhat different) generate lots of cash.

Yahoo Sports?

[Luthair]

Do Americans now consider suing to be a sport? :)

$166/user?!??!?

[Pascoea]

leaked reports put its daily active user base at 150 million ... with analysts claiming the company could be valued as high as $25 billion

$166/daily active user? That number seems ridiculously high.

Re:It's like my grandpa used to say

[TheRaven64]

They'll sell ads to other companies that don't make any money, but expect later to be able to monetise their userbase by selling ads.

Re:It's like my grandpa used to say

[elrous0]

Sure, we're losing money on every click. But we'll make it up in volume!

Re: Too Bad Facebook already co-opted it

[mrmaster]

I was told that whatsapp was dead" by my under 25-year-old relative while I am typing a response to a company in Costa Rica that only communicates to me via WhatsApp. There are bubbles everywhere.

Re:Too Bad Facebook already co-opted it

[aicrules]

Yeah and Google Plus or whatever it was called was the end of Facebook.

snake people

[allo]

Every time you read millennials, replace it by snake people.
This makes the bullshit a bit more funny.

Re:Too Bad Facebook already co-opted it

[Frosty Piss]

Yeah and Google Plus or whatever it was called was the end of Facebook.

Google Plus is still around, but rubes like you don't go there. Please continue not to go there.

Re:Too Bad Facebook already co-opted it

[aicrules]

I will continue not to go there as it adds nothing to my life. Just like Facebook's snapchat "killer" adds nothing to my life.

Re:Too Bad Facebook already co-opted it

[Frosty Piss]

I will continue not to go there as it adds nothing to my life.

And that the thing. That it adds nothing to your life does not mean that others feel the same way. Go ahead and judge them, after all we know everyone should be like you and those that are no are somehow deficient...