Remember back when everyone thought Evan Spiegel was insane for turning down Facebook’s $3 billion offer to acquire Snapchat? Well, I’m sure Spiegel is laughing as he counts the money that Snapchat is reportedly raising right now that will value the company at a whopping $19 billion. Considering how the app itself brings in virtually no revenue, why the hell are investors so happy to throw money at Snapchat? The answer may surprise you.
Not that long ago, Snapchat turned down a massive $3-billion acquisition offer from Facebook, and almost everyone thought the company had lost its mind. Now, the startup is reportedly raising money in a financing round that will value it at a staggering $19 billion. Is there anything that could justify putting that kind of market value on a company that is only four years old and still has almost no revenue? Technology analyst Ben Thompson thinks there is — and it’s more than just the fact that Snapchat has a huge audience of millennials and younger users, although that’s clearly part of it. Thompson argues in a recent post at his Stratechery blog that one of Snapchat’s strengths is somewhat counter-intuitive: Namely, the fact that its model is a lot more like television than it is anything else.
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