Snapchat, the latest craze amongst teenagers, is a smart phone application which allows users to send customizable photos and videos called “snaps” to each other. These Snaps then automatically delete themselves after an allocated period of time. With its ease of access and user friendly interface, Snapchat has replaced the conventional MMS (multimedia messaging service) message.

Due Snapchat’s undeniable popularity, major companies have started to take notice of them. In particular, Facebook, the social networking giant, has moved to acquire Snapchat with an acquisition bid of $3 billion dollars. This would have been Facebook’s largest ever purchase had Snapchat not rejected their offer.

$3 billion dollars is not an easy sum for anyone to reject. But to do so meant that Snapchat envisions themselves being valued even higher in the future. For a company that has yet to generate any revenue aside from capital investment, Snapchat’s founders have chosen the riskier path to riches.

Even with the knowledge that a firm’s true value may come from unseen assets, It was hard to image that a free smart phone application which has zero revenue streams could be immediately valued at $3 billion dollars. However, looking at Twitter which recently opened at $44.90 per share, thus valuing the company around $24.9 billion. We are able to put Snapchat’s potential into perspective and get a better sensing of how much it could really be worth in the end.

http://www.bbc.co.uk/news/business-24935361

http://www.bloomberg.com/news/2013-11-07/twitter-raises-1-82-billion-pricier-value-than-facebook.html