Losing your photos is worth $10bn - at least when it’s done by Snapchat, the hugely popular photo-sharing service. The Silicon Valley startup has is closing a $20m funding round from venture capital firm Kleiner Perkins Caufield & Byers.
The messaging company, which turned down a $3bn offer from Facebook in November 2013, has more than 100 million users every month, of whom two-thirds use it every day - a key metric that indicates high engagement with the service, which lets users send pictures and short video that is automatically deleted within seconds of being viewed.
On that basis, each user is worth about $100 - a figure that compares well with Microsoft’s investment in Facebook in September 2007, when the software company bought a 5% stake in the social networking company - then three years old - valuing each of its 42 million users at the time at $238, and the whole company at $10bn.
Like Facebook then, Snapchat is hugely popular with teenagers and young adults in the US and Europe, a key demographic who advertisers are keen to reach - and which Snapchat is willing to oblige, with plans to start introducing ads later this year in the free app. Presently it has no revenue.
According to the Wall St Journal, which first reported the investment on Tuesday night, another investor is also expected to provide capital to help fund the company’s explosive growth as it tries to expand to new territories. Established players such as WhatsApp, purchased by Facebook for $19bn in February, and Asian messaging services such as WeChat from China and Line from Japan will be seeking to head off attempts to tempt users away as the smartphone boom expands.
In all Snapchat has received total funding of over $160m from a number of different venture capital and seed funding companies, including China’s Tencent Holdings. Alibaba, the Chinese e-commerce company, reportedly considered an investment at the same valuation level.
If the deal with KPCB is completed, it would put Snapchat into the growing number of startups valued at over $10bn, including car-ride company Uber and room-finding service AirBnB.
Like those companies, Snapchat has been the subject of regulatory investigation, with the US Federal Trade Commission censuring it for incorrect claims about the destruction of data in
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