Snapchat is envied by many. The company is valued at $10 billion with essentially no revenue. That is about to change.
Speaking at Vanity Fair's New Establishment Summit in San Francisco Wednesday night, Evan Spiegel, a cofounder of Snapchat, said the company will soon debut ads, which will be featured in the Snapchat Stories feature. Users will be able to opt-out of ads. Mr. Spiegel says the ads won't be targeted, but he didn't say when the company will begin selling them.
“We’re cutting through a lot of the new technology stuff around ads to sort of the core of it, which I think has always been telling a story that leaves people with a new feeling,” Spiegel says, according to The Wall Street Journal. “They’re not fancy. You just look at it if you want to look at it, and you don’t if you don’t.”
The ads will be the first source of revenue for Snapchat, an app that allows users to share photos and videos that disappear after a few seconds. Investors have been pressing the company to find a source of revenue to justify such a stratospheric valuation. The venture capital firm Kleiner Perkins Caufield and Byers recently invested $20 million in the company and raised another $163 million in five rounds of funding. And last December, many were perplexed when Snapchat said no to a $3 billion takeover by Facebook. Snapchat was also in talks with Alibaba, but the talks broke down.
Snapchat is reportedly in talks with Yahoo, who wants to put $20 million into the photo messaging app.
Experts have wondered when the company, which is getting millions of dollars in investment, would finally find a way to get revenue from its 100 million monthly users, most of whom are young.
"From an advertising standpoint, it’s an immature medium, but the audience composition is amazing — 50% are below 25 and the number above 35 is in the single digits," Ben Winkler, chief digital officer and chief innovation officer at advertising firm OMD, told Mashable.
Taco Bell and Grubhub have already been using Snapchat to offer promotions and hold contests with loyal users.
Snapchat is also working to create a space where groups attending the same event can share stories, but the idea came to a head in Hong Kong recently, where protesters were using the app to share their experiences. Spiegel said that the company got into a big internal debate when deciding if they should create an "Our Story" feature for the protests. They decided against it.
“One of my pet peeves over time has been the technology industry has tried to sell counterculture, sell the revolution, and we have been really resistant to doing that,” he says. “We didn’t feel like pushing these photos and videos out would turn that attention into action that would be helpful in Hong Kong.”