Snapchats Recent Growth

Kelsey Morgan

Economics

Mrs. Straub

2/16/2014

Beginning as a project in a Stanford University classroom in April 2011, a new app appeared in iTunes stores for apple products by July 2011.  This app, now ranked as one of the top apps used for Android and Apple products, is Snapchat.  Since its release in 2011, Snapchat has grown in the number of users it reaches and is beginning to become a competitor to the still widely popular Facebook as seen in the graph below.

This increase in the apps demand has forced the company to consider other measures of revenue to keep up with the necessary production considering the app itself is free to consumers.  Snapchat began with its two creators, Evan Spiegel and Robert Murphy, who left Stanford University to pursue their idea of sending picture that could disappear, obviously finding the opportunity cost of Snapchat greater than continuing college.   In the past three years Snapchat has been gaining larger numbers of human capital, or employees, to keep up with the 350 million snaps sent daily.  Currently Snapchat has 35 employees working to keep up with all of the technical areas and also with promotions and also to keep creating new effects for Snapchat including the Snapchat stories.

            While consumers are still able to get the app for free, the business needs money to support their employees and systems to keep Snapchat running.  Snapchat was able to get $485,000 from investors in 2012 and since has been using series funding, or rounds of looking for funding for the company.  In Series A funding Snapchat was able to get $12.5 million followed by $60 million in Series B funding from IVP, or Institutional Venture Partners, and $50 million in Series C funding from Coatue Management.  These investors aren’t the only ones becoming interested in Snapchats success.  Facebook has already offered to purchase Snapchat for $3 billion and Google has offered $4 billion, yet Snapchat has declined both offers.  As of July, Snapchat was valued at $860 million, but this number has been drastically increasing as the apps popularity and economic growth increases.  Besides investors, Snapchat is looking at implementing ads into the app to gain revenue. In the picture below is a list of milestones reached by Snapchat since it began in 2011.

            The overall goal of the app is to give people a way to share their “moments” with friends and family without worrying about the permanence of a bad picture.  “People are living with this massive burden of managing a digital version of themselves,” CEO, Spiegel, says. ”It’s taken all of the fun out of communicating.”  He wants Snapchat to allow people to be able to be more natural and fun with their pictures they’re sending.  It’s a new form of communication that allows people to be less worried about how they look and care more about what they’re doing.  Most recently, though, Snapchat has been struggling with events of hacking and postings of people’s usernames and passwords online.  A new version of Snapchat will now be coming out that will let the users choose not to be in the “Find Friends” option which requires a stored phone number.  This hacking has not decreased the popularity of Snapchat, and this app is still receiving economic growth with its workers and technological resources.

Works Cited

Colao, J.J.. "Snapchat: The Biggest No-Revenue Mobile App Since Instagram." Forbes. Forbes Magazine, 27 Nov. 2012. Web. 14 Feb. 2014. <http://www.forbes.com/sites/jjcolao/2012/11/27/snapchat-the-biggest-no-revenue-mobile-app-since-instagram/>.

Ortutay, Barbara. "Snapchat suffers security breach." Yahoo! News. Yahoo!, 2 Jan. 2014. Web. 16 Feb. 2014. <http://news.yahoo.com/snapchat-suffers-security-breach-161817710--finance.html>.

"Snapchat." Snapchat. N.p., n.d. Web. 16 Feb. 2014. <http://www.snapchat.com>.

"Snapchat." Wikipedia. Wikimedia Foundation, 15 Feb. 2014. Web. 16 Feb. 2014. <http://en.wikipedia.org/wiki/Snapchat>.

"Snapchat Hiring Massive Sales Team, Said To Be Raising $100M At A Near $1B Valuation To Pay Them." TechCrunch. N.p., n.d. Web. 16 Feb. 2014. <http://techcrunch.com/2013/06/08/be-with-me-now-on-snapchat/>.

"Snapchat ‘smoothie hack’ spams users with images of fruity drinks." Tech2. N.p., n.d. Web. 16 Feb. 2014. <http://tech.firstpost.com/news-analysis/snapchat-faces-smoothie-hack-attack-218171.html>.

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