Alibaba Group Holding Ltd (NYSE:BABA) is buying a stake in Snapchat Inc in a deal that values the messaging company at $15 billion, reflecting the recent trend of higher valuations for Silicon Valley start-ups. Alibaba invested $200 million in Snapchat, says a report from the Wall Street Journal.
Alibaba gives high valuation to startup
Snapchat is one of the most valuable start-ups by market valuation, according to the Wall Street Journal analysis. Current valuation of Snapchat is way ahead of all the previous investments.
Snapchat succeeded at getting the funds from at least two investors, Yahoo Inc and a venture capital firm Kleiner Perkins Caufield & Byers in a round of funding that valued Snapchat at $10 billion last year. Other investors include Benchmark, General Catalyst Partners, Institutional Venture Partners, Lightspeed Venture Partners, Coatue Management LLC and DST Global.
The Wall Street Journal said in July that Alibaba Group Holding Ltd (NYSE:BABA) entered into discussion with Snapchat. Citing one of the sources aware of the latest deal, the report said Alibaba lacked interest, but then it was revived recently.
With Snapchat, Alibaba Group Holding Ltd (NYSE:BABA) will strike its first chord with the start-ups and social media. Previously, Alibaba has bought video call app maker TangoMe Inc mobile search provider Quixey Inc. and ride-hailing service Lyft. In China, Alibaba increased its investment in Weibo Corp social media company and has invested in its own Laiwang chat app.
Snapchat- impressive so far
Snapchat has been an interesting growth story, becoming a topic of discussion among the investors because of the short lived nature of its messages. Its text and photo messages fade away after a certain amount of time, doing away with the risk of user seeing or being haunted by the messages ever again. According to the sources who are aware of the company’s internal metrics note that it has more than 100 million users, says the report.
Snapchat CEO Evan Spiegel is making efforts to monetize the platform, and is already working in the direction. Recently, the company earned a stream of revenue by selling ads to the marketers including Samsung Electronics co and Universal Pictures. Spiegel is believed to be inspired by the Asian tech companies, who are building large businesses around mobile messaging apps.