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Snapchat preps mobile payments rollout as popularity of Stories and basic Snaps service continue to grow

"Your 'disappearing' messages didn't really disappear."
 
"It's just another teen fad."
 
"They should have taken the money."
 
At the ripe young age of 24 years-old, Snapchat CEO/cofounder Evan Spiegel and company CTO/cofounder Bobby Murphy have heard it all.  After morphing their self-destructing rich media messenger from a class project at Stanford University to a hot mobile launch in Sept. 2011, the pair quickly grew used to have venture capital funding thrown their way and media flocking in their wake.
 
But things hit a real fever pitch last November when Snapchat rebuked a $3B USD purchase offer from Facebook, Inc. (FB).  Adding fuel to the blaze, GigaOm founder Om Malik reported just a day later that Google Inc. (GOOG) had countered with a $4B USD offer, which (of course) was also rejected.
 
But amid relentless criticism and an alarming Dec. 2013 hack that exposed 4.6 million customers, company founders have found a way to deal with or drown out the distractions.  In May 2014 Snapchat settled privacy complaints with the U.S. Federal Trade Commission (FTC) over the hack and allegations about message storage by the Electronic Frontier Foundation (EFF) and other civil liberties groups.

Snapchat cofounders
Snapchat cofounders (left to right): Bobby Murphy (CTO) and Evan Spiegel (CEO) [Image Source: Forbes]

And this three-year-old dog has a new trick -- in October it added a feature called "Stories", which allow users to create themed collections of snaps that last 24 hours.  In June The Verge reported that the feature had passed a billion views a month, a month after it reported that Snapchat's traditional picture/video "snaps" had reached 700 million views per day.  Another source reported that daily picture uploads had hit 60 million.
 
Love it or hate it, it seems Snapchat is continuing to do what it does best -- attract an ever-growing legion of young users.  Snapchat reported this month that it had 100 million users, roughly two-thirds of which logged in its service daily.  That sounds disappointing compared to Twitter (271 million monthly users) or Facebook's Instagram (200 million monthly users).
 
But Snapchat's users are active -- incredibly active.  They're so active that Snapchat enjoys more picture uploads than Facebook, which has over a billion active monthly users.  Part of that is due to the fact that Snapchat doesn't appear to suffer the same bot issues that Facebook and Twitter do.  And Snapchat is popular.  Only Instagram and Facebook were more popular according to a recent study of users age 18-34 by comScore.

Snapchat logo

Perhaps those factors in part were what compelled what is perhaps Silicon Valley's most prestigious venture capital fund -- Kleiner Perkins Caufield & Byers (KPCB) -- to invest $20M USD in a fifth round of venture capital funding for a tiny 0.2 percent of shares, giving Snapchat a valuation of $10B USD.  The massive valuation places Snapchat historically in an elite cadre of Silicon Valley startups.  Recently Dropbox and Airbnb scored similar valuations, in January and April, respectively.  Smartphone amateur cabbie service Uber Inc. -- another KPCB investment -- in June wrangled up over $17B USD.
 
The deal was first reported by The Wall Street Journal on Monday.  KPCB has invested in most of the internet's eminent superpowers in their younger years, with pre-IPO stakes in Facebook, Google, Zynga Inc. (ZNGA), Amazon.com, Inc. (AMZN).
 
Another investor is reportedly already onboard for the round, which brings the startup's total haul to $163M USD in seed funding, according to TechCrunch.  TechCrunch reports the fifth round of funding (Series D) could total $100M USD.  The WSJ report also confirms that DST Global, the hedge fund of Russian billionaire Yuri Milner, had become an investor in May, raising the valuation to $7B USD.  Together KPCB, the other unnamed fifth round investor, and DST Global join Snapchat's small circle of seven investors.

Snapchat
Snapchat users are much more active than its rivals' users.

Reportedly, prior to the KPCB investment, Snapchat had been in talks with the investment wing of Jack Ma's Alibaba Group, owners of China's top e-commerce portal, which reportedly would have yielded the same $10B USD valuation.  Alibaba's smaller domestic rival, Tencent Holdings Comp., Ltd. (HKG:0700) has already invested in Snapchat.

Snapchat still has a long road to monetization, but it appears to be preparing the first steps.  In mid-July it filed for protections of two mobile payments related trademarks with the U.S. Patent and Trademark Office (USPTO).  Snapchat is also reportedly exploring other monetization tactics such as so-called "content discovery".

Mr. Spiegel and Mr. Murphy are more motivated than ever, though, with the deal promising to make them billionaires in an eventual IPO, according to Forbes.

Sources: WSJ [1], [2], ComScore, Forbes





"We can't expect users to use common sense. That would eliminate the need for all sorts of legislation, committees, oversight and lawyers." -- Christopher Jennings






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