In a move to counteract the growth of rival Tencent’s WeChat, e-commerce giant Alibaba has invested $200 million (£133 million) into Snapchat, upping its valuation to $15 billion (£10 billion).
This is a $5 billion (£3.35 billion) increase in just a few months, following Snapchat’s previous funding round. Alibaba is focused on Snapchat’s new ‘Discovery’ platform for news organisations, alongside the reported payment services coming soon.
Snapchat is already valued extremely highly due to its teen-centric 100 million user-base. For advertisers, having this young audience on a social platform is rare in 2015, and is deservedly valued higher than Facebook’s average user.
Alibaba has failed to make any real ground in the social world, despite investing in its own and third-party networks. Tencent, its major rival in China, has successfully grown WeChat and QQ to over 1 billion monthly users.
Even though Snapchat is banned, this investment by Alibaba could spur a change in the ruling if Alibaba tries to gain leverage for Snapchat through the regulatory process.
This would put Alibaba is an awkward position if the Chinese government believes it is allying with foreign companies for financial gain. Considering the government recently allowed them to open a private bank in Mainland China, it might be too risky to publicly back a US mobile service banned in China.
Still, having a minority stake in a startup looking to become one of the largest social networks is not a bad thing, but it certainly does raise questions as to what Alibaba wants from the deal.
Snapchat is one of the largest private companies in tech with this new valuation, putting it lower than Xiaomi and Uber (both valued at $40 billion (£27 billion)) but higher than Lyft, Pinterest and Spotify.