I find the rise and rise of Snapchat fascinating. Founded in 2011 by Stanford University undergraduates, Evan Spiegel and Bobby Murphy the company is now on the brink of a total public offering that reports indicate will value it at between US$20bn and US$25bn.
It is said that Messrs Spiegel and Murphy made a ground breaking observation back in 2011. Following on from the meteoric success of Facebook most people believed that networking became exponentially more valuable by amassing more users. Spiegel however observed that in real life even people with thousands of acquaintances spent most of their time with just a few friends whose value outweighed a larger number of looser ties. So Snapchat was devised as an App that would send messages and photos that disappear, mimicking the real world. Simple eh?
Spiegel does not fit what has come to be taken for the usual tech billionaires’ background and mode of living. He comes from a wealthy Los Angeles family – his father was a successful lawyer and Spiegel grew up in a privileged environment. He shunned making Silicon Valley his base and Snapchat, employing a very low head count of less than 2000, is based in Venice Beach, Los Angeles.
Facebook came calling in 2013 and offered US$3bn for the company – rejected by Spiegel. Back in 2011 there were only 1000 people using Snapchat – a year later this had increased to one million. Currently around 160 million people use the App. The average user opens the App more than 18 times a day and over 2.5bn messages are sent daily. Its current revenue is US$405m. Michael Sorrell, Chief Executive of Advertising Group WPP estimates his company spend around US$50m with Snapchat.
The New York Times estimates that each of Spiegel’s and Murphy’s 227 million shares were worth US$3.7bn at the end of last year. They hold nearly 89 percent of the company’s voting power, and will keep it even after the initial offering since the shares being sold to the public will hold no voting power.
Not bad work for two Stanford University undergraduates who are now 27 and 28 years old. Things move fast in this world?