The Ghost of Snapchat’s Past

The Headquarters of Snapchat Inc. sits between the shores of Venice Beach and Los Angeles’ bustling Pacific Ave. At the corner of Abbot Kinney and Venice Boulevards, one of the busiest intersections in the neighborhood, employees bike and skateboard to work. Despite looking like a laid-back beach shack, the company inside this building is one of the fastest growing and most dynamic businesses in the USA.

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Snapchat has surprised both Wall Street investors and Silicon Valley VCs with their quick growth and innovative advertising approach. Recently founded in 2011, the app has accumulated an impressive 100 – 200 million users. This month alone, it was reported that the app’s users were sending 6 billion videos a day.  By 2016, Snapchat had hit 10 billion daily video views.On any given day, the app reaches 41% of all 18 to 34 year-olds in the United States.

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The company currently has a valuation anywhere from $3 Billion  to $16 Billion, but with an equity offering, investors speculate (and the CEO claims) that the company could be worth $25 Billion. With the recent announcement that the company has privately filed to go public in March of 2017, Snapchat has become one of the most talked about tech and social media platforms in the country. Despite its impressive size and user count, Snapchat’s origins are rather crude.

Humble Beginnings

“I wish these photos I am sending this girl would disappear”

When Stanford junior Reggie Brown said these words to his classmate Evan Spiegel, the idea behind Snapchat was born. At its core, Snapchat was created to send raunchy photos (that you wouldn’t want your grandma to see). At first, the idea of temporary photos that disappeared after being sent was met with ridicule. When Evan presented the idea during his final project junior year, his classmates balked at the notion of temporary photos. Nonetheless, Evan and Bobby took no notice and began to work on the application. In the summer of 2011, Evan Spiegel and Reggie Brown along with classmate Bobby Murphy founded Snapchat, originally named “Picaboo“. Within two months, the application was relaunched under the new name “Snapchat.” Reggie Brown was Zuckerberged out of his shares by Evan Spiegel and is no longer apart of the company, but we won’t get into that here.

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Founder Evan Spiegel looking at pictures of his former business partner Reggie Brown

After being introduced to college students at Stanford and other universities, the app took flight. By April of 2012, the app had accrued over 100,000 users. Evan and Bobby quickly realized that this app had serious potential — in a blog post later than month, Evan proclaimed Snapchat’s mission statement:

“Snapchat isn’t about capturing the traditional Kodak moment. It’s about communicating with the full range of human emotion—not just what appears to be pretty or perfect.”

Fancy New Features

After proclaiming said mission statement, Snapchat went on to receive their first round of funding, obtaining half a million dollars from Lightspeed Venture Partners. From there, Snapchat went to be exponentially funded with investments and capital injections. They raised $160 Million in 2013, a combined $685 Million in 2014 and 2015, and in 2016 an impressive $1.8 Billion. By then, Snapchat was well beyond Unicorn status .

Early Snapchat users were millenials, mainly college students in fact. A year after its founding, Snapchat found itself with a bit of a dirty reputation. After all, the app was orignally made for Reggie Brown’s “sexting”. In a 2014 study, only 1.6% of respondents reported using Snapchat according to Reggie Brown’s wishes, although 14.2% admitted to having sent sexual content at some point. These findings suggest that users do not seem to utilize Snapchat for Reggie Brown-esque content. Rather, the primary content sent through Snapchat was comedic — such as “stupid faces”, with 59.8% reporting using the app for this purpose.

Over the next few years, Evan Spiegel and his growing company added a multitude of features to the app to maintain user interest and to bring in new users.

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One of Snapchat’s many filters

At the end of 2012, a feature was added that allowed the sending of short, 10-second videos that disappeared after viewing. The next year, after winning a pesky lawsuit with that Reggie Brown guy, Snapchat added the stories feature to their app, which allowed people to compile their snaps and publicly display them. This was the first marked transition Snapchat made to becoming a social media platform with a real network effect and staying power.  After refusing a $3 Billion buyout from Facebook in 2012, Snapchat added filters, timestamps and speed overlays. After recovering from a massive cyber attack in 2014, the application added direct texting and video conversation.

Scandal threatened Snapchat’s success in late 2014 when lewd emails were leaked (it turns out Evan Speigal likes to pee on women, among other things), but it was overshadowed by the introduction of geofilters, providing Snapchat with the first taste of actual monetization. By 2016, Snapchat had numerous additional features, such as memories, facial-recognition filters and tons of sponsored content.  This massive sponsored content campaign lies behind investors’ reasons for a $25 Billion valuation. According to recently leaked documents from inside the company, Snapchat, a $59 million business as of last year, aims to haul in $250 million to $350 million in 2016 and $500 million to $1 billion by the end of 2017.

Looking Ahead

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Do these look cool? Or do they make you look like a bug? You decide.

Snapchat is no longer a just a social media company, but a digital business. They’ve rebranded themselves once again, as Snap Inc. With the introduction of Snapchat  Spectacles, Snapchat is no longer just an app, but a “camera company”.

“We believe that reinventing the camera represents our greatest opportunity to improve the way people live and communicate.”

While these glasses are not available for retail sale yet, Snapchat is currently making them available in an exciting fashion. All over California, vending machines that dispense Snapchat Spectacles are appearing in trendy urban areas without warning. Evan Spiegel and Snapchat’s management want to create a sense of exclusivity around the spectacles, and these vending machines are the solution to their problem. Only time will tell if Snapchat’s first physical product will prove successful, but they will certainly help create publicity for Snapchat’s core product.

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People waiting in a 3 hour line for $130 sunglasses

After examining Snapchat’s history, two things become clear: 1) Snapchat’s growth is not slowing down anytime soon and their monetization efforts have just begun. After going public, Snapchat’s platform is likely to become even more immersive, with novel features and more ways for companies to reach out to their users with sponsored content. And 2) Evan Spiegal is a pretty terrible person.

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Urine trouble Evan!

11 comments

  1. Wow, Spiegal probably resents the fact that emails don’t disappear as quickly as snaps. Regardless, his shoddy character doesn’t seem to have stopped Snapchat from becoming massively successful. The question for investors moving forward seems to be how the company is going to turn the user base into advertising dollars. A $25 million value at IPO would be a 100x revenue multiple, and their decision to file privately makes it seem like their current revenues are on the low end of the projected range. I look forward to seeing the strategies investors have for making that next level of immersion profitable enough to warrant such high numbers. I also wonder whether the $25 million speculation was just Spiegal talking himself up, like he seems fond of doing.

  2. Nice, thorough history of Snapchat! Good work. I still don’t think they’re worth $25B, but who knows?

  3. polmankevin · ·

    Great post. I think the evolution of snapchat has surprised us all. From its humble beginnings it has grown into a hub for engaging content and breaking news stories. Their evolution has been slow but dramatic, one of the things that I admire about the company is that they haven’t completely changed the product. The core concept, sending and receiving pics/ videos, is still the main part of the business. I also really admire the way that they handled the recent spectacles rollout. The adventurous feel, limited product supply, and exclusivity catapulted the product from a cool trend to one of the hottest products in the tech community. Well done Snap, Inc.

  4. katieInc_ · ·

    Awesome post! I really like the level of detail you were able to achieve in describing Snapchat’s history. I remember most of the key events occurring throughout the past years, but when they are put into chronological order, Snapchat’s story is pretty remarkable (no pun intended). I am especially intrigued by their new branding the company as a “camera company” not just as an app. In my opinion, this is a strategic move. It is leaving the tech ‘rat race’ behind and differentiating itself into a space where few competitors exist. Regardless of its official definition and regardless of its status as a public vs. private firm, I believe we will still keep using it, for the most part, as a social platform while its additional features (filters and beyond) and capabilities (snapchat spectacles) continue to grow and innovate.

  5. sandytanny · ·

    Great post and very informative! It seems as if Snapchat is on everyone’s minds these days and it comes as no surprise considering how rapidly Snapchat has evolved from a sexting app to what we know and love today. I’m reading more about Evan Spiegel now because of your post and he certainly has an interesting past to say the absolute least. But, it is commendable to witness how Snapchat has been able to monetize their business so successfully and even venture into creating unexpected new products like the Snapchat Spectacles. It’s always exciting to see what new feature Snapchat will roll out next. Hopefully the company will continue to innovate and offer features that differentiate it from the competition.

  6. jagpalsingh03 · ·

    Great post! It’s so crazy that a company like Snap Inc with only 330 employees is worth $25 billion whereas a company like Fiat with over 220,000 employees is worth only about a 1/3 of that! It just goes to show you how impactful and crazy this digital age truly is. Never would I had thought that Snapchat, an app to send disappearing pictures would be competing with the Facebooks of the world. I think they have done a great job really broadening the use of their app with the filters, sponsored content, and ability to attract celebrities to use the platform. What was initially created as a platform to foster “intimacy” has become an app that connects millions of people from around the world. Even though the Spectacles have been well received, I’m still skeptical that they are anything more than a marketing ploy. I fail to see the consumer appeal to go out and buy these for actual use. Then again, I’m not the one who created a multi-billion dollar tech company. I’ll be interested to see what Snap Inc has in store for us in 2017.

  7. I like your approach on this blog post, it really was an overall encompassing history of Snap Inc from start to finish. The biggest question looming over Snapchat is its IPO, which is being blown out of proportion in terms of valuation. The company is able to be listed privately as the profits are under 1 billion so investors will not be able to see information until much later. On top of that, the revenue model is a big question mark in the future, as Snap glasses could run into many different problems of privacy or just any problems that Google Glasses (personally think Google had the better chance to pull it off) ran into. If Snapchat gets priced at 25-30 billion, this will set a precedent for bigger unicorns or decacorns (10bil +) like AirBnB and Uber in the future. Who knows, maybe they’ll go for 40-50 billion.

  8. gabcandelieri · ·

    Great post! I had never learned Snapchat’s complete history (especially the not so honorable parts) and I think you did a good job of giving us a brief synopsis. I think it is genius that Snapchat is currently only selling Spectacles through vending machines. This marketing ploy definitely makes those who receive a pair feel like they are part of an exclusive club, raising the overall status of the product. Although many people have suggested the Spectacles may be a fad, I have a feeling Snapchat is onto something novel in the camera space. The fact that the glasses view exactly how and what you are viewing without public awareness is extremely unique and may cause further privacy issues. Having researched Snapchat’s Discover feature and sponsorships for one of my blog posts I definitely agree that Snapchat has only begun to scratch the surface of profitability in these areas. Excited to see what they come up with next!

  9. Fun post! I didn’t know any of Snapchat’s background, so this was really educating. Their beachfront headquarters is pretty unusual, but hey, #disruption. Like many advances — and not just technological ones — it’s interesting to see how Snapchat usage has deviated from its original sexting intent. Also, I really like how you formatted this blog post – you made great use of the WordPress graphic design and layout options!

  10. Great post. I remember reading this a few years ago when Evan Spiegel turned down the $3 billion offer from Mark Zuckerberg and remember saying “what a moron, he’s going to regret this” but I guess I was completely wrong. Up until they introduced the advertisements (which is now obviously their primary source of revenue), their only way to raise capital was selling equity to investors (which they did several times in order to keep the company afloat). I think these glasses will definitely take away a significant portion of GoPro’s business and if they can make them cheaper in the long run, more people will want to purchase them for all sorts of events that they’ll want to remember. I’m assuming they have other ideas that they plan on implementing into the future as well. I still don’t think the company is worth $25 billion right now but who knows?

  11. adamsmea89 · ·

    this was a great summary of snapchats history! A lot of info that I was not aware of. I think it is possible they will be valued at 10+ billion just based off of other social media companies. Snapchat has such a strong network at this point that I think it is only a matter of time before they figure out how to monetize it in someway. I am sure they have ideas that are very different than what we think of as snapchat today, and if they are able to successfully pivot to these new ideas they will be worth their valuation. Years ago people did not think of Facebook as a news outlet, and now that is exactly what they are. I would bet that a few years from not snapchat will be entirely different than it is today.

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