Snapchat is planning to make London its headquarters for international operations. This comes at a time when Britain voted to exit the European Union. The move by the messaging app delivers an additional vote of confidence in the tech standings of Britain as it gets ready to exit the European Union.
The Move By Snapchat Dismisses Fears of a Possible Departure of Britain from the EU
If the UK departed from the EU, the financial sector would be shaken. However, it now appears that tech companies are still positive about the UK despite Brexit. Some tech companies looking to take advantage of the low rates of tax have chosen Luxembourg or Ireland as their international headquarters. Some have channeled their investments in London to take advantage of the booming creative hub of the city. This comes as great news to British workers and leaders, who have been facing future financial uncertainties since the UK voted to exit the European Union last June.
Is 2017 the Year for Snapchat?
Snapchat is hoping to make a record this year, and it has put in place strategic plans to help achieve its goals. For instance, the company is planning to go public after spending the last four years expanding and developing new operations. Snapchat has observed that the growing number of tech and creative centers in London could help boost their international efforts.
According to Claire Valoti, UK’s Snap Group general manager, Snapchat believes in UK’s creative industries. Additionally, Claire explained that most of Snapchat’s advertising clients are in the UK and that the company enjoys daily UK Snapchatters of up-to 10 million plus. The company has already stated hiring UK talent.
Snapchat was initially launched in 2012, and since then, it has grown to become a big social media platform rather than a mere picture messaging service. This expansion allows users to communicate amongst themselves and engage with advertising news and stories. Reports show that Snapchat has increasingly become popular with high-school and middle aged teenagers, who in most cases opt to use Snapchat over its competitors such as Facebook and Twitter, which are more established.
The London Headquarters
Snapchat’s London headquarters will be recording sales made in Britain as well as client sales from outside the US, where Snapchat is yet to arrange a sales force. In its office in London, Snapchat has a staff of approximately 75 individuals already. However, the company is planning to expand its base. Amazon, Facebook, and Google have also increased their investments in this area. For example, Google has plans to hire an additional 3,000 employees and similarly, Facebook is hoping to amp its efforts up-to 50 percent.
What Does This Mean to the UK?
Snapchat’s move has brought some comfort to the country. Moreover, the UK has proved its booming advertising industry, relatively lower tax rates and skilled workforce. It is surprising to see that the country can still attract talent and firms at a time of market disruptions following the vote. There have been speculations that crack downs by the European Union on lower rates of tax in Luxembourg and Ireland could make more companies choose to explore the UK as their best expansion option following its departure from the European Union.
Although Snapchat is happy to have a daily worldwide engagement of approximately 150 million users and approximately $20 billion in value, it has not turned a profit yet. Moreover, the company seems less concerned about London’s slightly higher rates of tax. Things are expected to take a different course for Snapchat this year, and it is forecasting revenue of approximately $1 billion. Although this revenue forecast falls significantly shorter that of its peer techs companies like Facebook and Twitter, the rate of growth of the messaging service is nearly eight times more than that of the competitors. Reports show that most of Snapchat users, approximately 50 million come from Europe.
Ever since the June referendum decision, companies such as Amazon, Facebook, and Google have been seen increasing their investments in London. However, leading start-ups and tech firms have expressed their concerns that restrictions on peoples’ movements could make London lesser attractive in future.
Major tech companies from the U.S. such as Apple, Google, and Facebook have faced a lot of criticisms because of the manner they handle affairs related to tax. Most of these tech firms have opted to have their European headquarters in Ireland so that they can benefit from lower European Union tax rates. The European headquarters for Amazon are in Luxembourg because of the lower European Union tax rates. It is clear that Snapchat isn’t following a similar path with its spokesman saying that it chose to have its headquarters in London to make sure that its finance structure is in line with its business operations.
Despite uncertainties brought about by the June Brexit vote, London remains attractive to most global tech companies. This could be because of its immense talent in tech and creative sectors. The position of the city as a worldwide financial hub provides additional access to funding, especially for start-ups. Moreover, it provides access to capital for the larger companies.