Mike Isaac

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Here’s Why One Snapchat Investor Thinks the App Is Worth Billions

snapchatdollar640You may have heard by now — Snapchat is worth a lot of money to a lot of important people.

If the app doesn’t end up selling to Facebook for billions (and, for now, it looks like it won’t), the company looks to soon raise hundreds of millions of dollars in venture capital.

So, why, pray tell, is everyone from Mark Zuckerberg to most of Sand Hill Road willing to throw oodles of cash at a startup that makes zero revenue?

The answer, according to at least one Snapchat investor, is all in the push of a button.

For those who haven’t used Snapchat, a quick primer: Users send photo or video messages to one another, which can be viewed for a limited period of time before vanishing from the other person’s phone. In order to view those messages, one must press and hold their finger against the phone’s screen for the length of the snapchat message — anywhere from one to 10 seconds.

That “press and hold” action, according to this person, is ripe with potential. While social networks like Facebook or Twitter serve ads inside the stream — the place where users spend the most time — there’s no guarantee those ads will capture a user’s attention. With a quick flick of the thumb, you’re able to scoot past an ad to your friends’ status updates and tweets.

Viewing a snap, however, comes with a much higher probability that you’ve got a user’s attention: If your thumb is pressed against the screen, it’s very likely that you’re staring at what’s in front of you. That’s the perfect time, then, to serve up an ad.

That’s not to say this is what Snapchat actually plans to do. While CEO Evan Spiegel has said he’s quite amenable to slotting ads into his service, the company isn’t focused on ramping up revenue at the moment. (Right now, the most you’ll see are “little experiments” in the form of commercials for local bands.)

Still, it’s at least some explanation for why lots of folks are clamoring to sink money into a startup that seems like a silly, revenue-less exercise in selfie-taking. Aside from the company’s crazy-high engagement numbers, it’s not entirely without potential.

Caveat to all of this: Monetizing parallel messaging services like chat or email has long been a gripe in the tech community. So, however much potential Snapchat may have, it’s still an uphill battle.

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