Snap Inc., the U.S. developer of messenger app Snapchat, has for the first time revealed how much it paid for Ukrainian startup Looksery Inc.
According to the registration statement for Snap’s IPO on the New York Stock Exchange, the company paid $150 million for Odesa startup Looksery “to enhance the functionality of our platform.”
Looksery developed the real time face-changing and tracking technology used in the Snapchat lens feature. The price tag of $150 million for the Odesa startup tallies with unconfirmed reports made at the time of the sale.
The purchase consideration was $79.4 million. In addition to it, the U.S. company provided for an additional $71.2 million, of which $43.6 million is in the form of restricted stock units to employees for future services. The remaining $27.6 million relates to cash payments, a portion of which was paid at the acquisition close, with the remainder being paid to employees for future services over the four years after the transaction.
Snap also incurred $16.4 million in transaction-related costs.
“We believe that the best way to compete in a world of widely distributed mobile applications is innovating to create the most engaging products. Our strategy is to invest in product innovation and take risks to improve our camera platform,” Snap stated.
Looksery was founded by Victor Shaburov, an entrepreneur from Odesa, in 2013. It launched a crowdfunding campaign on Kickstarter that same year and overshot its goal, collecting around $50,000.
As a mobile app, Looksery was available for download free of charge in Apple’s App Store and Google’s Google Play. At that time, the app reached around 10 million downloads on all mobile platforms, but after the purchase the Looksery app has disappeared from all mobile app stores.
The Snapchat app, however, introduced a new feature, called Lenses, that modifies the user’s face, making the eyes bigger, face leaner, adding graphic symbols, like emojis, and turning one’s appearance into that of, for example, a ghost, or making skin wrinkled.
The way Snapchat’s Lenses feature works is almost identical to how the Looksery app used to change one’s appearance. The feature has become the signature feature of Snapchat, which by the end of 2016 had 158 million active users, and over 2.5 billion Snaps are created every day.
The company’s goal now is to raise $3 billion by selling shares, and after the successful IPO, its value could be $20 billion.
Currently, Snap generates revenue primarily through advertising, but last year the company spent $110 million more than it made, earning $404 million last year, while spending $514 million.
“While not all of our investments will pay off in the long run, we are willing to take risks in an attempt to create the best and most differentiated products on the market,” the company writes.
Snap lists its main competitors including Apple, Facebook (including Instagram and WhatsApp), Google (including YouTube), Twitter, Kakao, LINE, Naver (including Snow), and Tencent.
In the registration statement, Snap even accused Instagram, a subsidiary of Facebook, of stealing its “‘stories’ feature, which largely mimics our Stories feature.”
In late 2016, Snap launched Spectacles, its first hardware product – glasses-like wearables to take photos (Snaps) or video on the go and send them via Snapchat.
Kyiv Post staff writer Denys Krasnikov can be reached at [email protected].
