If I were guessing (and I am): probably not, but later stage investors usually want their ~10-20% of the company in a round. After a string of "no, we don't need that $YYm++", the valuation (the only truly negotiable number in the negotiation) gets high enough that it is insane to continue saying "no".
And then the kids will move on to the next thing. Hopefully, for the sake of their investors, that happens after they've been acquired for a billion. Rinse, repeat.
I've read teens are slowly moving away from facebook to Twitter & Instagram. Probably because it has less drama. It is more about narcissism without needing to reply to anybody.
We'll never truly know if instagram could've stuck around had it not been acquired.
Twitter is an indispensable communications medium that has more than 1 use case (read news, talk to friends, overthrow a government, etc). Thus ads makes sense (and I would even pay a low, yearly fee to keep it around).
Snapchat is interesting, but $100 million interesting?
Uh, that doesn't explain how they're making money, or plan to. More users = more photos transmitted = more bandwidth = more money burned, and not earned.
I imagine it's actually fairly simple for them to integrate ads: you'll have to watch a ~10 second ad before you can see your message.
Edited to add:
Not to mention that they have a captive audience--you'll have to watch the ad, which I have to think is prime ad space that they can charge for.
I don't think that model will ever work. Most SnapChats are trivial random stuff. Cute but you're not going to sit through 10 seconds of Citibank's credit card pitch to see your buddy with a small carrot sticking out his nose. Secondly, SnapChat's are typically under 5 seconds. So it's like watching 2 hour long commercial for a 1 hour show.
On the contrary, 5 seconds for an Ad is the sweet spot before people get pissed off. Look at YouTube videos. They require you to watch about 10 seconds before you get the "skip ad" option and it seems to be working great for them.
Great for them. Snapchat is the only service in recent memory that I've actually overheard high schoolers use as a verb. If you can define a new way to share something that gets its own language, you've got something pretty interesting.
What does that even mean? What is "the next generation mobile platform?" I'm not even sure what you mean by "mobile platform." Snapchat is a mechanism for sending photos to friends. Privately. People don't want to send messages on it. They don't want a Snapchat "news feed"(doesn't make sense since the whole point is privacy).
Why do they need to become a mobile platform? The founders can charge $0.99 for an annual app subscription and sit back and have a great income. Instead $100M will evaporate trying to become another FB/Twitter, which doesn't even make sense.
Again, everything you mention is based on the current state. No successful entrepreneur raises money (or runs there company for that matter) planning on the status quo not changing.
Why doesn't it make sense? Snapchat has become massively popular on mobile devices, and much moreso than even Facebook and Twitter in terms of engagement and growth.
People had literally this exact same sentiment about Facebook in 2008-2010. ("It's just a photo sharing site for kids...") And they also suggested adding a subscription service. Instagram sold before they got along to integrating ads (they had less than 20 employees), but that product was/is on a similar trajectory. There doesn't exist a single large social network that directly charges users, so I don't think you can just assume that's a valid strategy.
When you're on a wave like this, you ride it. They likely sold <15% of the company for that $100MM. Sure, the current product is silly. But it's unbelievably sticky for users and really fun. If you don't understand this, I bet haven't used it at length. It feels surprisingly like Twitter did early on. A new medium. A new protocol. A new way of interacting with friends.
"Toys are not really as innocent as they look. Toys and games are preludes to serious ideas.” - Charles Eames
Rumor is they already tried to buy them and after the snapchat CEO rejected them they built Facebook poke (which is a prettier snapchat clone). Details about potential purchase price were never leaked.
It is important to note that in the startup community it is generally a good tactic to raise money when you don't need it, because that gives you enormous leverage in the negotiation. If, on the other hand, you're in a negotiation where the other side knows you need the money, you are going to get much worse terms.
This holds true when you are building a product where you'll potentially need money to scale but you know that though you are growing rapidly, your current infrastructure be enough for a while. There, you can raise money against the future.
But this is snapchat. Don't expect them to become another Facebook, don't expect them to become another twitter. Because they've already defined their use case, which is simple and straight forward so why $100m?
It's all going toward Snapchat R&D and sales, of course. Staying on the cutting edge of technology and maintaining your paying customers is tough in today's market.
Interesting to see everyone speculate on how terrible of an investment this is when most users couldn't wrap their head around the concept of Snapchat ~7 months ago.
Here's why the need $100 million: They are building the future of chat and they already have incredible engagement and growth month over month.
I tutored teenagers in physics and math for a while to make ends meet. And they love snapchat. They are also basically ready to be done with facebook.
There are two reasons they prefer snapchat to facebook and texting, respectively, both of which basically come down to privacy:
1) Their parents are on facebook
2) They know that what they say today might look stupid tomorrow, and facebook (and the phone companies) save everything, forever.
Basically, they have figured out that what they say when they are 13 will look ridiculous when they are 17. And what they say when they are 17 will be really cringe-worthy when they are in college. They also know that facebook's track record on privacy is awful, so even if they went through the trouble to create different types of friend lists, with different access settings, etc., facebook could just change everything tomorrow.
I could easily see snapchat expanding to build an entire social network built around the "only see for 10 seconds and its gone" feature, and droves of teenagers moving onto it. If they do, facebook could be in serious trouble.
Conceivably they could build out the address book/friends list features to create a persistent profile, and then all the other media content is temporary.
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[ 3.6 ms ] story [ 122 ms ] threadHowever, note that everything you read is not necessarily true. Unless you have HARD DATA, whatever you read may very well be made up.
"Didn't people say"
Twitter is an indispensable communications medium that has more than 1 use case (read news, talk to friends, overthrow a government, etc). Thus ads makes sense (and I would even pay a low, yearly fee to keep it around).
Snapchat is interesting, but $100 million interesting?
[1] http://gigaom.com/2013/05/07/snapchats-act-of-faith-in-build...;
http://www.slideshare.net/kleinerperkins/kpcb-internet-trend...
Edited to add: Not to mention that they have a captive audience--you'll have to watch the ad, which I have to think is prime ad space that they can charge for.
http://www.businessinsider.com/venture-capital-kingpin-klein...
Everyone looks at these kinds of things with wide eyed astonishment. We are talking Pets.com era stupidity in valuations.
Why do they need to become a mobile platform? The founders can charge $0.99 for an annual app subscription and sit back and have a great income. Instead $100M will evaporate trying to become another FB/Twitter, which doesn't even make sense.
Diversity of product use.
Lack of existing brand stigma.
People had literally this exact same sentiment about Facebook in 2008-2010. ("It's just a photo sharing site for kids...") And they also suggested adding a subscription service. Instagram sold before they got along to integrating ads (they had less than 20 employees), but that product was/is on a similar trajectory. There doesn't exist a single large social network that directly charges users, so I don't think you can just assume that's a valid strategy.
When you're on a wave like this, you ride it. They likely sold <15% of the company for that $100MM. Sure, the current product is silly. But it's unbelievably sticky for users and really fun. If you don't understand this, I bet haven't used it at length. It feels surprisingly like Twitter did early on. A new medium. A new protocol. A new way of interacting with friends.
"Toys are not really as innocent as they look. Toys and games are preludes to serious ideas.” - Charles Eames
Snapchat CEO welcoming Facebook: http://www.theverge.com/2012/12/21/3793648/snapchat-ceo-on-p...
http://news.softpedia.com/news/Facebook-s-Poke-App-Is-a-Snap...
http://techcrunch.com/2012/12/21/facebook-poke-app/
But this is snapchat. Don't expect them to become another Facebook, don't expect them to become another twitter. Because they've already defined their use case, which is simple and straight forward so why $100m?
Here's why the need $100 million: They are building the future of chat and they already have incredible engagement and growth month over month.
There are two reasons they prefer snapchat to facebook and texting, respectively, both of which basically come down to privacy:
1) Their parents are on facebook
2) They know that what they say today might look stupid tomorrow, and facebook (and the phone companies) save everything, forever.
Basically, they have figured out that what they say when they are 13 will look ridiculous when they are 17. And what they say when they are 17 will be really cringe-worthy when they are in college. They also know that facebook's track record on privacy is awful, so even if they went through the trouble to create different types of friend lists, with different access settings, etc., facebook could just change everything tomorrow.
I could easily see snapchat expanding to build an entire social network built around the "only see for 10 seconds and its gone" feature, and droves of teenagers moving onto it. If they do, facebook could be in serious trouble.