Here's the question that's hanging over the Snap initial public offering, which is expected to start trading on Thursday: Is Snap the next Facebook, or is it the next Twitter?

The implication, of course, is that if Snap is the next Facebook, money managers should snap up as many shares as they can. And that if Snap is the next Twitter, they've got to find something else to do with their money.

Entrepreneurs and their backers will be watching the Snap IPO closely. Snap embodies just about all of the stereotypes about so-called unicorns: It's growing quickly (although there are some concerns here); it's bringing in revenue but losing money; it has shown the ability to innovate; and it's chasing a huge market. If Snap does well, it will show that investors are willing to back a money-losing company as long as the market is huge and the proof-of-concept is compelling. It would be great news for companies such as Airbnb and Uber, which are also expected to go public this year.

If the Snap IPO is a dud, entrepreneurs of similarly ambitious but money-losing companies will have to rethink their financing plans. In short: Get profitable, now.

But here's the irony: If you look at the filing for Snap's IPO, it's got to be even more promising than Facebook was at its IPO to justify its price. And Facebook, at its IPO, was a much larger company, with a faster growth rate among its user base, than Snap is now.

Of course, no one's going to be buying Snap based purely on the numbers. There's a tremendous amount of hype around the company. It's impossible to tell how much of it is driven by its potential to persuade television advertisers to hop onto a new platform that appeals greatly to young people, and how much of it is driven by Baby Boomers and Gen-Xers worried they're going to miss out on a great investment opportunity because they don't understand the new toy that fascinates today's cool kids. Snap has shown a real ability to innovate--think vertical video, Snap Memories, and Spectacles--that has frankly eluded Twitter. There's the added bonus that tech IPOs have been thin on the ground lately. If investing in newly-public tech companies is a significant part of your investment strategy, there hasn't been much to buy lately.

That being said, it's worth considering a few relevant metrics for each of these companies at the time of their IPOs and ask: Is Snap the next Facebook, or is it Twitter?

Monthly Active Users:

Facebook: 845 million

Twitter: 215 million

Snap: 161 million

In the size of its user base, Snap is clearly closer to Twitter.

Active Users: Growth Rate

Facebook: 48 percent annual growth rate; 141 percent growth in the most recent quarter

Twitter: 44 percent annual growth rate; 7 percent growth in the most recent quarter

Snap: 48 percent annual growth rate; 3 percent growth in the most recent quarter

Here's what has consistently been called the biggest red flag in the Snap offering: Is growth slowing? The growth rate of Snap's user base, on an annual basis, seems to be about the same as Facebook and Twitter's were. But at the time of its IPO, growth in the size of Facebook's user base actually seemed to be accelerating--from a huge base. Snap's growth is appearing to do the opposite.

That's especially problematic because Snap is nowhere near as big as Facebook and Twitter are now. Facebook has about 1.86 billion monthly users; Twitter has 319 million.

When it comes to growth in the number of users, right now, we appear to be looking at something more akin to Twitter than to Facebook.

Annual Revenues:

Facebook: $3.7 billion

Twitter: $317 million

Snap: $404 million

Again, it's easy to spot the difference between Facebook everyone else. When it filed to go public, Facebook had $3.7 billion in annual revenue.

Annual Revenue Growth:

Facebook: 88 percent

Twitter: 198 percent

Snap: 590 percent

Here, then, is the promise of Snap. Its monetization efforts basically came out of nowhere, and when it got serious about making money, things really seemed to fall into place. How much growth is there to be had? One estimate says Snap will bring in $1 billion in 2017.

Net Annual Income

Facebook: $1 billion in earnings

Twitter: losses of $79 million

Snap: losses of $515 million

Yes, Facebook was solidly profitable when it went public. Snap is losing money. A lot.


Facebook went public at about 28 times revenues.

Twitter went public at about 44 times revenues.

Snap is expected to go public at about 60 times revenues.

This is where it gets really dicey. You can understand investors paying a ton of money for Twitter, because they realized too late what a powerhouse Facebook was. No one wants to miss out on that twice. But now Snap is valued at twice what Facebook was, and history shows that not every social-media platform that goes public turns into a Facebook clone. Right now, Facebook itself is trading at about 25 times revenues. Does it make sense for Snap--which isn't making money-- to be twice as pricey?

It's easy to say that the math doesn't add up.

The other argument is that Snap is just earlier in its history than either Facebook or Twitter, and with vertical video and Spectacles, it's shown way more ability to be innovative and to create--not just stay on top of--trends than Twitter has. Big brands are dying to reach Snap's audience. Advertisements that now appear on television could flow to Snap instead. Investors are hungry for tech IPOs. Snap has buzz to spare. Therefore, it's time.

On Thursday, investors will know which explanation is closer to the truth.