First, not all users are equal. It could be that the userbase of Snapchat is especially important (being young trendsetters) rather than the mass of users joining because all their friends are there.
Second, when Facebook bought WhatsApp, it wasn't for monetization but for taking a threat off the market. WhatsApp and Facebook compete for the time of the same users; I don't think you could ever put the actual financial value of WhatsApp at $20b; but it could very well interfere with the plans of your $100b+ business which goes after the time and networking effect of the same users.
I feel like at this point Snapchat and Facebook are playing chicken. This will end up as an acquisition deal. Snapchat could never monetize to warrant that valuation, while Facebook would pay a lot of money to, again, win the engagement of these users slipping away from its platform.
There aren't too many ways Snapchat could translate its paper value into cash: only an IPO (not a chance, they're not IPO material) or an acquisition by Google, Microsoft or Facebook (others aren't big enough for placing this bet, and Apple doesn't seem to care enough about services to make such an acquisition, especially with the slightly shady element of the Snapchat concept).
So Snapchat and its investors will come together to push the value higher and higher until one of the tech giants break and buys the thing. I doubt Snapchat remain an independent entity while justifying this valuation. They are in competition with the next big thing.
Comments
First, not all users are equal. It could be that the userbase of Snapchat is especially important (being young trendsetters) rather than the mass of users joining because all their friends are there.
Second, when Facebook bought WhatsApp, it wasn't for monetization but for taking a threat off the market. WhatsApp and Facebook compete for the time of the same users; I don't think you could ever put the actual financial value of WhatsApp at $20b; but it could very well interfere with the plans of your $100b+ business which goes after the time and networking effect of the same users.
I feel like at this point Snapchat and Facebook are playing chicken. This will end up as an acquisition deal. Snapchat could never monetize to warrant that valuation, while Facebook would pay a lot of money to, again, win the engagement of these users slipping away from its platform. There aren't too many ways Snapchat could translate its paper value into cash: only an IPO (not a chance, they're not IPO material) or an acquisition by Google, Microsoft or Facebook (others aren't big enough for placing this bet, and Apple doesn't seem to care enough about services to make such an acquisition, especially with the slightly shady element of the Snapchat concept).
So Snapchat and its investors will come together to push the value higher and higher until one of the tech giants break and buys the thing. I doubt Snapchat remain an independent entity while justifying this valuation. They are in competition with the next big thing.