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.
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.
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.
“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.
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.
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.
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.
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.