A year after snubbing Facebook, Snapchat is in discussions with investors led by Alibaba Group Holding Ltd. for a multi-billion dollar investment.
The investment will value Snapchat at around $10 billion, which is more than three times the $3 billion takeover offer by Facebook that the company rejected.
Snapchat, whose app allows users to send to other users pictures and videos that will disappear after a few moments once they are seen, also rejected a $4 billion offer from Google after the offer of Facebook.
Executives of Snapchat, led by 24-year-old CEO Evan Spiegel, have said that they are "in it for the long run," not agreeing to sell Snapchat to a bigger company.
If the investment from Alibaba pulls through, Snapchat will be the latest start-up to rake in an 11-figure amount despite not making any profit from its service. Snapchat users are sending out over 700 million "snaps" daily, but the company isn't making any money out of it.
A $10 billion valuation will put Snapchat in elite company, as according to CB Insights, the only other private, venture-backed start-up companies that have received such valuations are Dropbox, Airbnb, Xiaomi and Uber, with the ride-booking service receiving $1.2 billion in funding last month to boost its value to $18 billion.
In addition, despite Snapchat's little to no generation of revenue, a $10 billion investment will be consistent with the status of the current market, according to Karlin Ventures managing partner TX Zhao.
"With Alibaba's investment, I think the valuation is well-justified," Zhao said. "You'd get a lot of reach having Alibaba as a strategic investor and I think the reach that they have - that's where the monetization value is."
Alibaba's investment in Snapchat, in addition to getting a huge stake in the company, will also increase the Chinese group's presence in the United States, where Alibaba has plans to launch an initial public offering soon.
Alibaba's planned acquisition of Snapchat will also give the investment group leverage in its rivalry with Tencent, which owns the increasingly popular WeChat mobile messaging app.
"In its quest for global Internet domination, Alibaba wants a competing messaging app - the future of mobile commerce both in Asia and in the U.S. - and Snapchat is one of only a small handful of messaging apps that are still private and independent," said Privco CEO Sam Hamadeh.
Alibaba is looking at launching its initial public offering on Aug. 8, with a float size that could reach a value of over $20 billion.
