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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),, 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 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

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Crack kills
By Shadowmaster625 on 8/27/2014 10:27:27 AM , Rating: 5
Market valuations dont matter. The fact is that this is a worthless company, it has absolutely no value. Compare Crapchat to a company like Dropbox . People are tied to dropbox, because it can be a pain in the butt to switch over to another cloud service, move all your files, set up all your computers, etc etc. Contrast that with this worthless trashcan garbage company. There is absolutely nothing tying its users to this service. It holds no relevant IP. Its just a frickin goddam instant message app. One of thousands. It is worth precisely jack diddly squat. Users could abandon it at any moment, at no cost to them. And that is exactly what will happen. The only question is: who will be holding the bag when it happens?

RE: Crack kills
By FITCamaro on 8/27/2014 11:54:58 AM , Rating: 2
Yeah I would have taken the money and run. The moment someone else comes out with a new trendy chat app that does something else people think is cool, the masses will abandon snapchat. The owners would be wise to sell while someone is willing to pay for this.

RE: Crack kills
By surt on 8/27/2014 4:36:34 PM , Rating: 2
More importantly, the moment they try to suck two billion dollars per year out of their customers wallets ('monetize') their users will move on to the next cool up-and-coming free service.

RE: Crack kills
By bah12 on 8/29/2014 10:41:51 AM , Rating: 3
Agreed. All of these social chat/post apps fill essentially the same role. One could argue it started with MySpace.

Personally here is what has happened with my daughter. She gets all into Facebook. Dad gets and account makes her friend me. She goes to twitter, same thing. Now shes on snapchat. It is literally an age old tradition, now being played out virtually. Everyone wants to be where the cool kids are, until everyone is there then it isn't cool anymore. Sometimes I think investors forget just how flaky youth are, they will move on to the next big thing and not give it one thought.

And that is the achilles heel of all of these services, they are by their very nature trendy and thus short term.

RE: Crack kills
By Reclaimer77 on 8/27/14, Rating: 0
RE: Crack kills
By Nortel on 8/27/2014 12:26:20 PM , Rating: 2
Well he has a point... A company like OMGPop was purchased by Zynga for $180 million and is completely worthless. Who plays Draw Something anymore?

Zynga in itself was worth over $14 a share and is now lucky to be trading under $3. Now that is a dogsh!t company.

RE: Crack kills
By Samus on 8/27/2014 2:46:41 PM , Rating: 2
The only way all these companies are going to survive is if they all integrate with each other.

Because in the end, most people are only going to use one service.

But since Facehook is just a monopoly (for now) and just wants to buy everybody they're scared of, fat chance of that ever happening. The irony is this will be their doom, because companies like this will always be around to refuse to sell.

These guys are in it for the long haul. They actually want to slaughter their competition.

RE: Crack kills
By FITCamaro on 8/27/2014 3:18:16 PM , Rating: 2
But they better figure out a way to monetize it soon. Venture capital won't flow in forever when you're not making any money.

RE: Crack kills
By Solandri on 8/27/2014 7:05:33 PM , Rating: 3
Because in the end, most people are only going to use one service.

The way I'd like to see it play out is the way instant messaging did. It started off with each company jealously guarding their client base within their own fiefdom. But eventually user demands for interoperability won out. Now you can still use whichever IM client you want, but can seamlessly message to people using other IM clients. (The same thing actually happened with email back in the 1980s, with Bitnet, Arpanet, etc. coming up with a cross-compatible email protocol and relays so they could all exchange email. But I figured most readers could probably relate to IM.)

The way I'm hoping the future looks is that you can use Facebook, or Google+, or even Geocities or some homebrew system you wrote yourself to host your personal timeline, photos, etc. But because they present these different elements using an open and compatible protocol, you can view, browse, and comment on any of the other social networks using your network as a front-end client.

RE: Crack kills
By chripuck on 8/28/2014 7:37:35 AM , Rating: 3
Jealous? You're damn right I'm jealous. I'm jealous that they came up with one of the simplest/stupidest of ideas that somehow teens and college kids have flocked too. I'm jealous that somehow, someone, somewhere seems to think that all of these kids can be significantly monetized and value it at 10 BILLION dollars.

This isn't even Instagram level quality here, at least that has some uniqueness to it. It's WhatsApp with self destruct functionality and they'd be idiots to not sell as quickly as possible.

RE: Crack kills
By Dr of crap on 8/27/2014 12:21:37 PM , Rating: 3
Yep worth nothing.

UNTIL (fill in the company with mega bucks) buys it for tens of billions, and the two retire to the Bahamas.

Some see value where others don't. Yes I agree at sometime in the future this will pass the it's "hot and now" peak. But its still rising for now!

Hold on.
By Homerboy on 8/27/2014 10:21:57 AM , Rating: 2
Until somebody writes a check, they are "worth" exactly $0.

RE: Hold on.
By Argon18 on 8/27/2014 11:46:46 AM , Rating: 2
Exactly. These two dudes, as smart as they may be, are idiots for turning down $4 Billion for their silly little phone app. They'll spend the rest of their lives regretting that decision, no doubt.

RE: Hold on.
By Arkive on 8/27/2014 2:01:06 PM , Rating: 3

How can you possibly know that? People who are way smarter than you and me put together invested millions in these "idiots" for a microscopic slice of the pie. Clearly they, and a lot of other people with real business acumen, know something you don't. Maybe you should wait and see where the dust settles first. Something tells me they might come out of this ok.

RE: Hold on.
By Apone on 8/27/2014 2:04:56 PM , Rating: 2
@ Argon18

It doesn't matter; if/when SnapChat goes public, these two guys will get a vested stake in the company (in addition to their already-generous executive salaries) in the form of stock which means they'll easily have hundreds of millions that can be liquidated into cash if need be. So hundreds of millions of dollars might as well be a billion dollars IMO.

RE: Hold on.
By masamasa on 8/27/2014 2:53:05 PM , Rating: 2
They are smart enough to build the app, but fools for not taking the money. They will learn the hard way.

Sell Out Now!
By Flunk on 8/27/2014 11:03:17 AM , Rating: 2
Considering that Snapchat is just another IM program that happens to have managed to snag a bunch of users and they risk losing them all at the drop of a hat just like MSN Messenger, AIM, BBM and ICQ all did they should sell out immediately. That valuation is insane.

"If they're going to pirate somebody, we want it to be us rather than somebody else." -- Microsoft Business Group President Jeff Raikes

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