The funding from the Chinese ecommerce company, first reported by Bloomberg, means that Snapchat’s worth has increased by $5bn in a matter of months. It dwarfs the $3bn offered by Facebook for the company in late 2013.
It puts the four-year-old company into the top ranks of privately held startups.
Evan Spiegel, Snapchat chief executive, declined to comment, but said: “We are famous for not talking about the future.”
With Snapchat blocked in China it is unclear what immediate value the startup would bring to Alibaba, which handles more online commerce than Amazon and eBay combined.
Alibaba, which has seen a steady increase in shopping on smartphones and tablets, has made it a priority to develop mobile services. However, its attempt to create a popular messaging app has had little success, coming up against arch-rival Tencent’s widely used WeChat service.
Tencent, China’s biggest social networking and entertainment company, also invested in Snapchat in 2013, TechCrunch reported at the time.
Duncan Clark, managing director of Beijing-based tech consultancy BDA, said: “We know that Tencent powered ahead of Alibaba in mobile with WeChat, so Snapchat as the ‘it’ company for youth social networks in the West has an obvious appeal.”
China’s large internet firms are making these investments partly as a defensive move against each other, with potential for financial returns and partnering in China if regulations permit, he added.
“It’s better from their perspective from earning virtually nothing on their cash in the bank. These are small bets for them,” said Clark.
Snapchat, which allows its 100m users to send messages that disappear in seconds, had sought capital to extend its core service.
In January, it began carrying videos and articles from mainstream media outlets including CNN and ESPN, bringing Snapchat into closer competition with Facebook and Twitter Inc.
A potential allure for Alibaba could be Snapchat’s use as a payment service, as the Chinese company looks to connect consumers and merchants in China and the United States. This includes smoothing the way for cross-border payments.
In November, Snapchat launched a service to let users send money to each other, in a partnership with online payments company Square.
Alibaba, founded by entrepreneur Jack Ma in 1999, listed on the New York Stock Exchange last September in the world’s largest public offering. Its shares have slipped 12% since then and closed on Wednesday at $81.99, valuing the company at $206bn.
Alibaba declined to comment.
Meanwhile, ride-sharing service Lyft said it raised an additional $530m in a funding round led by Japanese online retailer Rakuten, giving the Uber rival a valuation of $2.5bn and adding momentum to its expansion plans.
The valuation, however, pales by comparison to the $40bn that Uber is said to be worth.
This article was written by Staff and agencies, for theguardian.com on Thursday 12th March 2015 12.03 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010