From fortune.com

Vanessa Borowicz posted an article on her blog about Yahoo’s rumored interest in purchasing Snapchat. According to her article, Yahoo is valuing Snapchat at $10 billion. Personally, I have a hard time understanding how a company that has never made a single dollar in revenue could possibly be worth so much money. But this is not the first time a social media company has received an astronomical valuation. Facebook bought Instagram two years ago for $1 billion, and WhatsApp earlier this year for $19 billion.

As we talked about in class, it is nearly impossible to determine the value of a company until it changes ownership. This is due to intangible assets such as company image and brand power. Is this why Snapchat is worth so much? It must be part of it, but I think there is something else to consider. With over 700 million messages sent through Snapchat every day ^[1], potential revenue for this company is enormous. If they ever do decide to advertise, considering the number of eyeballs they receive every single day, $10 billion starts to look a little more realistic.

I believe this must be the reason for this incredibly high valuation. Yahoo does not want Snapchat for its image, they want it for its client base. Owning Snapchat would give them access to a new demographic, and the ability to reach over 700 million people every day.

[1] http://money.cnn.com/2014/08/01/technology/social/snapchat-10-billion/