Amid talk of an initial public offering, SnapChat raises $537.6 million

Millennials and deep-pocketed investors have escalated Snapchat's valuation.Snapchat

Already flush, Snapchat just got more cash.

After raising $200 million in March, the photo-messaging app has raised an additional $537.6 million, according to government documents released on Friday.

Those securities filings suggest that Snapchat might pull in another $112.3 million in funding, bringing its total for this year alone to $850 million. CNBC reported that the latest funding values the company at a whopping $16 billion.

If true, not only would that make the 4-year-old company one of the most valuable venture-backed startups in the world, behind Uber and smartphone maker Xiaomi, but also it would place Snapchat firmly in the company of a select handful of apps that have ridden virality to stratospheric valuations.

Founded in 2011, Snapchat allows users to take photos and videos that self-destruct after a set time, and the app has seen a meteoric rise in its popularity, powered especially by a key advertising demographic: teenagers and millennials in the developed world. According to research firm ComScore in March, 71 percent of its US users are 18 to 34 years old.

Since then, messaging services have become some of the most highly valued startups in the industry. Last year, Facebook paid $19 billion for WhatsApp, a service that started as a way to help people text one another cheaply.That was enough to attract Mark Zuckerberg, Facebook's CEO, who was said to have offered $3 billion to buy Snapchat in 2013. Snapchat demurred.

Snapchat isn't just raising money, though. On Tuesday, Snapchat's 24-year-old CEO, Evan Spiegel, disclosed publicly for the first time that the company is mulling going public.

A report in January concluded that 200 million people actively use Snapchat, up from 100 million users last August. That's still far less than WhatsApp's 800 million active users or even the600 million people who use Facebook's own chatting service called Messenger.

Still, the hype around Snapchat has helped the company raise cash from some big names in Silicon Valley. Venture capital firm Kleiner Perkins Caufield & Byers invested $20 million within the last year when the company was then valued at $10 billion. And Chinese e-commerce giant Alibaba made a $200 million investment in the company in March that valued the company at $15 billion.

Though Snapchat knows how to raise cash, it still hasn't figured out how to make it. The company has generated little revenue, despite various efforts to attract advertisers. In January, it launched a feature called Discover, delivering videos created by major companies such as CNN, Yahoo News, National Geographic, the Food Network and ESPN, among others.

Sketchy Snapchat backup services leave users exposed

Third-party services that let Snapchat users back up their photos and videos -- and that Snapchat claims it tried to shut down -- are at the center of the latest Snapchat hack.

An enormous, 13-gigabyte library of photos and videos from an estimated 200,000 accounts had been saved through apps and websites not affiliated with Snapchat has been hacked. Snapchat popularized "ephemeral" messaging services, which claim to delete messages after they are viewed.

A close read of Snapchat's privacy policy indicates that the service would not be in violation of any of its publicly-posted policies to keep messages long after users think they've been deleted. The policy states that "there may be ways to access Snaps" on your device even after the app has deleted them.

That appears to have been the case with the two third-party services that are suspected of being at the center of the hack, details of which were first reported by Business Insider on Friday. SnapSave, anAndroid app, and the similarly named SnapSaved, a website that closed down several months ago, allowed Snapchat users to read messages outside of Snapchat's app. They also appear to have created backups of messages.

It's not clear if the backups were created intentionally, or if the services were created with the express purpose of storing Snapchat messages without the knowledge or permission of Snapchat users."What we do know is that our servers have not been breached and no Snaps have been leaked from our servers," Snapchat spokeswoman Mary Ritti told CNET.Snapchat put the blame squarely on the shoulders of its users, and said, "Snapchatters were victimized by their use of third-party apps to send and receive Snaps, a practice that we expressly prohibit in our Terms of Use precisely because they compromise our users' security. We vigilantly monitor the App Store and Google Play for illegal third-party apps and have succeeded in getting many of these removed."

The company did not answer questions about what steps it has taken to warn its users about these third-party services aside from its Terms of Service.

Chris Eng, vice president of research at computer-security research firm Veracode, said Snapchat has "a history of not taking security seriously."

"SnapSave was in the [Google Play Store] since 2013. That alone suggests to me that they're not being very aggressive" about policing third-party apps, Eng said.

He added that Snapchat was slow to adopt encryption, a common tool to protect Internet traffic from snooping, and that Snapchat's initial implementation of encryption was weak because they used only a "single encryption key."

"I would bet that they've never had an independent security review," Eng said, referring to a common way for companies to evaluate how tough their security is.

Snapchat is best known for offering something Facebook and Twitter don't: A way to send messages without having to think about what they'll look like a few years from now. When customers send each other photo or video "snaps," recipients can view them for a short amount of time before they disappear. Snapchat debuted in 2011.

The service has now become one of the titans of the social-networking industry, particularly attracting users aged 18 to 24. One estimate says that half of Snapchat users are teenagers between 13 and 17 years old.

Facebook reportedly attempted to buy the firm for $3 billion last year, in addition to fielding two apps of its own that attempt to offer similar functionality. In August, ComScore said the app had become the third-most popular social media app in the US, behind Facebook and its photo-sharing service Instagram.

The Snapchat-related breach comes a month after hackers cracked open Apple's iCloud service tosteal celebrity photos, many of which depicted the celebrities in nude or sexual situations.

Actress Jennifer Lawrence spoke to Vanity Fair about the iCloud hack. "It is not a scandal. It is a sex crime," she said, calling the hack a "sexual violation" and attacking the sites that host the photos as "disgusting."

Victims of the Snapchat hack are left with little recourse. While celebrities have used their star power tothreaten Google with a lawsuit for linking to images stolen from iCloud, Snapchat users so far do not appear to be linked. Contacting the administrators of websites that are hosting the images may be the only way to get photos and videos from Snapchat removed, and there's no guarantee that will work.

Not all ephemeral messaging services are as open to third parties as Snapchat. Wickr, a similar service that not only can delete messages after they've been sent, but also encrypt them so that not even Wickr employees can see what users are sending to each other, prevents third-party services from accessing its servers.

Wickr's Android app is prevented from taking screenshots. But users can take screenshots in Wickr on an iPhone because Apple doesn't allow developers to disable screen-capturing in iOS.

Yahoo looking into Snapchat investment, report says

Yahoo may invest in Snapchat with part of its windfall from Allibaba's IPO.Richard Nieva/CNET

Yahoo is in talks to invest in the popular messaging app Snapchat, as it considers what to do with the multibillion-dollar cash haul it got from the market debut of the e-commerce giant Alibaba last month, according to The Wall Street Journal.

The investment round would value Snapchat -- which specializes in messages that disappear seconds after they've been opened -- at $10 billion, though it's unclear how much Yahoo would invest.

A Yahoo spokesperson declined to comment on the report, and Snapchat did not immediately respond to a request for comment.

The news comes while investors await Yahoo CEO Marissa Mayer's next moves, as scrutiny of the company increases in the wake of the Alibaba IPO. In the offering, Yahoo got a windfall of over $8 billion for selling about 6 percent of its stake in the Chinese company. Activist investors have also been clamoring for transformative corporate moves, like merging with AOL or selling to Japanese telecommunications company Softbank.

Snapchat is no stranger to big-tech suitors. The company, which makes almost no revenue, has reportedly spurned acquisition offers of more than $3 billion from the likes of Facebook and Google.Yahoo is in the midst of an attempted turnaround as it tries to rejuvenate its ailing core products and advertising business. The company has already refreshed each of its mobile properties, including Yahoo Sports and Finance, but the updated product suite has yet to rock Yahoo's bottom line. The company doesn't break out mobile revenue, and display-ad revenue -- an important financial metric for the company -- slumped 7 percent last quarter. The company has already promised to return at least half of the IPO proceeds to investors, but the large influx of capital, coupled with the cash it already had on hand, gives Yahoo some flexibility.

The possible investment in Snapchat also comes as Yahoo reportedly bolsters its internal efforts at building a mobile messaging service. The company acquired the startup MessageMe, a service similar to Facebook's WhatsApp. TechCrunch earlier reported the news.

The buyout was a talent grab, with MessageMe shutting down and the startup's eight members joining Yahoo, a spokesperson for the Internet giant told CNET. The MessageMe team will be working on mobile communications products for Yahoo, the startup said in a blog post.

Facebook pokes at Snapchat again with new app: Slingshot

By Ian Sherr

Slingshot is Facebook's latest take on the ephemeral app.Facebook

Facebook is trying once again to catch Snapchat's wave.

The social-networking behemoth is launching on Tuesday a new app called Slingshot that allows people to share short-lived photos and videos with one another. This concept, which caught fire through competitors like Snapchat, encourages people to share less carefully edited photos and videos by promising they'll be deleted shortly after they've been seen.

One twist, though, is that unlike most other apps, Slingshot requires users to share something before they can view any images from others. That twist -- along with a focus on sending to groups, rather than to individuals -- is what Facebook hopes will broaden Slingshot's appeal.

"We're not a messaging app," said Joey Flynn, a product designer on the Slingshot project. Flynn said the dynamic of requiring users to share something each time they want to see everything their friends have sent since they last used the app has the potential to encourage people to upload more often and to be more creative about what they share.

Slingshot's release marks the second time Facebook has attempted to encroach on the turf of other so-called ephemeral apps.

Facebook tried to make waves in messaging back in 2012 when it released an app called Poke, which played off an early messaging feature in Facebook. The Poke app more directly emulated Snapchat's service by offering users the chance to have the image self-destruct after 1, 3, 5, or 10 seconds. Facebook quietly removed the Poke app last month.

While Poke stalled, Snapchat grabbed the attention of teens and adults, rapidly increasing its valuation and making it an attractive acquisition target. In November, Facebook allegedly offered $3 billion to buy the company.

Facebook

Slingshot follows a different path than Poke, though. Photos and videos still self-destruct after they're viewed, but recipients can look at a photo, or watch a video on loop, for as long as they wish before flicking it away with their finger.

When a user first opens up the app on their smartphone running Google's Android or Apple's iOS operating system, they're presented with a simple camera app. The settings include the ability to turn the flash on and off, a "selfie" feature which turns on the front-facing camera, and a list at the top saying how many images from other Slingshot users are waiting for them. Users can take a video or a photo. After a photo is taken, for example, there are options to add text, icons or even drawings to emphasize a point or reach for the height of silliness.

Once done, users choose which of their friends they'd like to send the image to -- all, a group, or a single person. After they've uploaded their creations, they can see a feed of their friends' shots. If a user feels inclined to reply to an image they can do so. The reply is sent directly to the friend and doesn't require the user to share something new first.

"We wanted to create an environment where it's comfortable to share in," Flynn said.

None of the service is tied directly to Facebook other than the ability to connect with friends from the social network on Slingshot's service -- an unusual move by the company. Facebook said the list of friends is primarily built from phone numbers, culled from a smartphone's address book.

Slingshot was initially built during a hackathon in December by Flynn and Rocky Smith, now a lead engineer on the project. The team has since grown to about 10 employees.

Unlike any other app Facebook has built, Slingshot isn't being marketed with the company's branding, another unusual twist.

Facebook is also managing expectations, saying it doesn't expect all that a billion of its users to immediately jump on board. The company instead said it expects the app to grow slowly and plans to tweak as it along the way. Facebook doesn't even have plans to promote the app on its website.

"We're not going to fly a flag about it," Flynn said. "We want it to start with a small group."

Slingshot follows Facebook's recent strategy of building a universe of apps that tie back -- even tangentially -- to its core network and services in an effort to improve its presence in mobile. The company has built up Instagram, a picture-sharing company it bought in 2012. Facebook has also steadily increased the features of its Messenger app, and released a new program for reading through a feed called Paper.

These different apps appear to be more successful than the company's Facebook Home initiative, which attempted to take over a smartphone's home screen with an app that could display images from a user's friends and offer an easy way to send messages back and forth.

Now, the company is pushing even harder with its strategy of multiple apps with Slingshot.

Not to be outdone, Snapchat announced new features for its own app Tuesday, allowing groups of users in the same location to collect their photos and videos and share them as part of the larger event. "We wanted to build something that offered a community perspective - lots of different points of view," Snapchat said in a statement.

Facebook Reportedly Offered $1 Billion to Acquire Snapchat

Investor worries regarding the growing number of potentially overfunded tech companies seemed to have died down in recent months, but new information surrounding popular app Snapchat could renew talk of a tech bubble.

Facebook offered $1 billion in a bid to acquire photo-sharing app Snapchat, according to The Wall Street Journal, citing sources briefed on the matter. Snapchat CEO Evan Spiegel reportedly turned down the offer, although sources did not specify when the offer took place.

That $1 billion number may sound familiar because it’s exactly what Facebook paid to acquire another photo-sharing app, Instagram, just last year. The deal was roundly lauded as a move that could help bolster Facebook's staying power, as it struggles to hold onto users who are growing tired of blogging about their lives, instead preferring to share photos via mobile apps.

Similarly, 

acquiring Snapchat — which claims that its users send 350 million photo messages per day — would help Facebook corner the market on popular photo-sharing apps

acquiring Snapchat — which claims that its users send 350 million photo messages per day — would help Facebook corner the market on popular photo-sharing apps, as well as help the social network attract a younger demographic. The latter issue is particularly important, as some reports say younger users are beginning to lose interest in Facebook.

Last year, Facebook launched Poke, an app that many describe as a Snapchat clone because it allows users to send photos that disappear after a short amount of time.

If reports of the $1 billion offer from Facebookare confirmed, it would place Snapchat in the same category as startups such asInstagram and Google-acquired Waze, which were purchased despite showing no significant revenue.

For Snapchat naysayers, it's useful to remember that not long ago, early large valuations placed on Twitter — once viewed as a frivolous messaging platform — were also seen as a product of a tech bubble. Today, Twitter is considered an essential part of the media landscape and has filed an IPO that values the company at around $11 billion.

Given that recent history, Snapchat’s current valuation may not be as outlandish as some may think.

Facebook and Snapchat did not immediately respond to requests for comment.