One big reason why Snapchat’s rumoured $16 billion valuation makes sense

Snapchat is raising $US650 million at a $US16 billion valuation, according to a CNBC report Friday. The new funding comes less than three months after it raised $US200 million at a $US15 billion valuation in March. The mobile communication app founded in 2011 has raised $US848 million in total venture capital money so far.

One of the biggest reasons why investors are throwing money at Snapchat is its massive popularity with millennials, the age group between 18 to 24 years old. According to BI Intelligence, millennials account for roughly 45% of the Snapchat users, by far the largest percentage among all social network sites (Facebook’s millennials comprise 16% of its users, according to the chart). If you expand the group to include 18 to 34 year olds, which is the demographic sweet spot for advertisers, a staggering 71% of all Snapchat users fall in this category.

The big question mark is when will Snapchat be able to monetise this user base. Snapchat started running ads in October 2014, and earlier this month, rolled out a new ad format that takes advantage of its video content. Snapchat CEO Evan Spiegel said this week that Snapchat has nearly 100 million daily active users, 65% of which are creating their own content every day.


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