Remember when Snapchat turned down Facebook’s $3 billion offer? Oh, and Google’s $4 billion subsequent bid? Yeah, we were all a bit confused. But not as confused as we were when news broke out today that Snapchat - a company that has never made any money - has been valued at $10 billion.
According to Bloomberg reports, the ephemeral messaging application is in talks with investors such as Alibaba (the Chinese equivalent of Amazon) for a round of financing that sends the companies worth into the 10 zeros territory. So far the popular photo app has raised $133 million from outside investments, although with Alibaba’s top Chinese competitor Tencent already a covert investor in the company, the deal may ensue even more tension.
But why are people so eager to snap up a company with absolutely zero revenue? Following suit from the funding of Facebook and Google, investors expect to multiply the money they backed when the companies one day become super-profitable. For example in 2007, when Microsoft was ridiculed for its $240 million investment in Facebook which was valued at (a then whopping) $15 billion. Nowadays however, the company’s market capitalization is estimated to be at $195 billion, and the rest of the internet is hanging their head in shame. So far, Snapchat seems to be doing alright with more than 700 million fleeting “snaps” are sent, 500 million stories viewed on a daily basis, and the app continuing to fend off competition from copy-cat apps like Slingshot.
But it all could still go terribly wrong. Do you also remember Myspace? Or what about Andrew Mason, that Groupon CEO who was fired after he turned down a $6 billion offer from Google and now… works as a self-employed musician. Ah well, if it all goes right for Snapchat CEO Evan Spiegel at least we’ll still have all those misogynistic emails from his college days to mock him for. And they’ll never disappear after 10 seconds.
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