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Friday, October 24, 2014


Original Story:

Snapchat is to show its users adverts for the first time this weekend.

Despite not having a regular source of revenue, Snapchat was recently valued in the region of $10 billion (£6 billion).

Co-founder Evan Spiegel revealed the plans to show adverts on the app last week - but the firm has so far refused to say who the first buyer is.

'This weekend we’re placing an advertisement in “Recent Updates” for Snapchatters in the United States,' the firm said.

'It’s the first time we’ve done anything like this because it’s the first time we’ve been paid to put content in that space.

'It’s going to feel a little weird at first, but we’re taking the plunge.'

The firms 24-year-old co-founder Speigel told Vanity Fair's New Establishment Summit that sponsored posts will only show up on the app's Stories feature.

Snapchat Stories add Snaps together to create a narrative.

When a user adds a Snap to a Story it lives for 24 hours before it disappears, making room for the new.

Mr Spiegel said: 'People are going to see the first ads on Snapchat soon. We think they're pretty cool.'

He added that the adverts will be opt-in, and users can choose to look at them, or skip.

'The best advertisements tell you more about stuff that actually interests you,' the firm promised today.

'An advertisement will appear in your Recent Updates from time to time, and you can choose if you want to watch it.

No biggie. It goes away after you view it or within 24 hours, just like Stories.'

The firm also admits exactly why it is introducing the feature.

'The answer is probably unsurprising – we need to make money.

'Advertising allows us to support our service while delivering neat content to Snapchatters.

'We promise that we’ll use the money we make to continue to surprise the Snapchat community with more terrific products – that’s what we love to do!'

It also pledged it will never put ads in personal communications.

'That would be totally rude. We want to see if we can deliver an experience that’s fun and informative, the way ads used to be, before they got creepy and targeted.'  

Earlier this week, reports claimed Yahoo was reportedly preparing to invest £12 million ($20 million) in Snapchat.

Despite not yet having a source of revenue, more than 100 million users use the app - which is apparently enough to convince companies to spend vast sums on the three-year old startup.

Yahoo’s move follows an almost identical investment from venture capital firm Kleiner Perkins Caufield and Byer in August.

The move comes after a similar, albeit much larger, investment in Chinese technology firm Alibaba reaped huge dividends for Yahoo, with its $1 billion investment in 40 per cent of the company in 2005 now valued at tens of billions of dollars.

This latest move, according to the Wall Street Journal, comes as Snapchat starts to seek funding from venture-capital firms, money managers and companies.

Snapchat may be a key partner to Yahoo as it gets set to release Snapchat Discovery next year.

This is a rumoured service that will display brief ads alongside news and video clips on the app, which will likely become a key source of revenue for Snapchat.

Snapchat Discovery would provide a platform for Yahoo to distribute its own content.

However, the £6 billion ($10 billion) valuation of a company that hasn't, yet, monetised its users, has been dubbed a risky proposition.

That’s not to say it hasn’t worked before; Microsoft’s 2007 investment in Facebook valued the then three-year old company at £9.4 billion ($15 billion), and later proved hugely successful.

Last year Snapchat infamously turned down a £1.8 billion ($3 billion) offer from Facebook - a decision that left many stunned.

But the move seems to have paid off, as Snapchat’s owners Evan Spiegel and Bobby Murphy are set to become billionaires according to the current valuations of the company.

If the valuation holds true, Snapchat would join a select club of tech startups with valuations of £6 billion ($10 billion) or more, including car-ride service Uber and rooms-to-let startup AirBnB.

Snapchat lets users send photo-messages that vanish within seconds, but is expected to soon begin offering advertising or branch out into additional services.

This may include the ability to send instant money transfers to other users.

Although Snapchat, and other similar mobile messaging apps, don't have established business models yet, its rapid user growth and perceptions of advertising potential have aroused intense investor interest over the past year or so.

Snapchat is continuing to grow in popularity, with people sending more than 700 million disappearing messages a day.

In June, Facebook launched a similar app called Slingshot in the hope of replicating Snapchat’s success.

The app lets consumers exchange photos and videos, which later disappear, without requiring Facebook accounts.

But despite its rapid growth, Snapchat has had a number of obstacles to contend with.

The group this year settled charges with US regulators, which accused it of deceiving consumers by promising that photos sent on its service disappeared forever after a period of time.

According to the Federal Trade Commission at the time, photos sent on Snapchat could, in fact, be saved by recipients using several methods, such as taking a screenshot.