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Is Snapchat Worth $15 Billion?

Posted by: on Sep 24, 2015 | No Comments

Recently, it was announced that Alibaba is going to invest $ 200 million in the Snapchat, a Los Angeles based start-up. This seems to be a great move for Snapchat. Based on the offer of Alibaba, Snapchat is valued at $ 15 billion.

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Currently, we can just speculate that how this is going to impact the two companies, however, it could be very advantageous for both of them. Although, Snapchat is hugely famous in the United States, it is recently blocked in China. And, since Alibaba is a well-known and big e-commerce company in China, they are having difficulty challenging Amazon’s dominance and gaining traction in the United States. When Snapchat and Alibaba will work together, both of these companies can become more profitable by gaining access to new markets. In the online retail industry of China, Alibaba has a strong position. Alibaba has tried to influence the online retail market of the United States by filing their IPO, but have yet to make a dent in the market share of Amazon. One major reason behind this is, although, in China, Alibaba and its affiliates may be household names, but in the United States, they are relatively unheard of. By investing in Snapchat, they hope to change this. With Snapchat and their previous investments in other mobile companies, it is quite clear that Alibaba is making efforts to diversify their business. They have noticed more users are moving over to mobile, and It is clear to Alibaba that it is important to have a strong position in the mobile space to stay competitive against the other famous e-commerce firms.

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Tencent is another company that has made moves into the mobile space with their tremendously successful mobile messaging app, known as, WeChat, along with several other investments in mobile services and mobile game companies. Alibaba has observed that how their competitor made skyrocket profit in this area, and is quickly working to catch up. As WeChat is having difficulty gaining a following in western markets, Alibaba hopes to take benefit of Snapchat’s user-base in the United States. Although Snapchat has made a huge impression in the mobile messaging space of the United States, but they are still figuring out the ways to monetize all of their users. Currently, they are working on a number of new features, such as photo saving, mobile payments, and video chat.

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