A few months ago, I wrote a post about what seemed like a perplexing disconnect in valuations between VC-backed Facebook app developers and a publicly traded dating app company called SNAP Interactive.
At the time, New York-based SNAP, best known for a Facebook matchmaking feature called Are You Interested?, had a market capitalization around $7 million. This seemed odd, given that SNAP was profitable and, with some 14 million monthly active users (MAUs), not too far out of the league of Facebook gaming app developers Playfish and Playdom, which had sold in deals valued at up to $400 million and $763 million.
In recent months, however, things have turned around. And SNAP’s valuation has caught up, currently hovering just over $100 million.
Call it the power of getting noticed.
“What pretty much happened was that on December 22, Bloomberg came out with an article comparing our growth to other dating sites,” says Cliff Lerner, Snap’s CEO. “And then once that article hit the wire, the stock really started to move.”
Over the next few days, shares of SNAP, which had been languishing around 20 cents apiece on the over-the-counter exchange, shot up to $1.85. The company secured a private placement of $8.5 million in January, and shares remained on a tear in February, topping at over $4 on Valentine’s Day.
Since then, some of the investor appears to have love worn off, but not too drastically, with the stock currently trading a bit above $3 a share.
The moral of the story? I guess you could take your pick of a couple options. One is that speculation and crazy gyrations in social networking companies needn’t be confined to private investors and trading exchanges such as SharesPost and SecondMarket. Public investors can do it too.
A second lesson may be that for investors in the social media space, buzz really does matter, perhaps more than performance. One would think that, since traffic to app developers is clearly tracked by third party sources, and SNAP’s public filings demonstrated the company’s ability to monetize users, setting a valuation would be pretty straightforward. But instead, the stock price languished and then suddenly picked up.
“I think people just didn’t know who we were. We had very limited exposure in the public markets,” Lerner says. “But the growth had been there all along pretty much.”