Snapchat's young audience fuels a growth streak

Jefferson Graham | USA TODAY

Show Caption Hide Caption Snapchat | Talking Tech Talking Tech | Inside Snapchat, one of this year's most popular apps.

Young co-founders were Stanford classmates

150 million images sent daily via Snapchat

Based in beach house on famed Venice boardwalk

VENICE, Calif. — It's a quiet Thursday morning here at the beach.

The sunglass stand is about to open, a guitar player is tuning up to play songs for tips, and tourists are walking up and down the boardwalk as they visit this colorful Los Angeles community.

A blue beach house with a big picture of a cartoonish ghost perched outside alerts those in the know — mostly young folks — that this could be where millions of funny faces and risqué poses are navigated every day.

This is the home of Snapchat, the instant-messaging app beloved by teens and college students. The free app — used to send photos and short video clips that vanish within 10 seconds — has grown dramatically in its two years of existence. It now generates 150 million "snaps" sent daily around the globe, more than double from 60 million daily in February. (By comparison, the Instagram photo app, which was snapped up by Facebook in 2012 for $1 billion, generates 40 million photos daily.)

"People call it an overnight success," says CEO Evan Spiegel, who is 22. "But it was anything but. The first year was slow."

Now, with $14 million in financing from two widely respected venture capital firms, Lightspeed Ventures and Benchmark Capital, Snapchat is valued at $50 million to $60 million, and many analysts consider it the next big tech acquisition target.

Mitch Lasky, a Benchmark partner, decided to invest after he saw his teenage kids and their friends using the app. An early investor in many tech companies, including Twitter and Instagram, he's blown away by the quick embrace of Snapchat. "This is the fastest ramp I've ever seen," he says.

The service "satisfied a real primal communication need for teens to share something more emotionally engaging than a text message, without the permanence of a staged photo," he adds.

The beach house headquarters is situated here because it's in front of constant crowds of people who walk by every year — a terrific potential test audience, should the team want to reach out, Spiegel says. On the morning USA TODAY visited, 14 employees were humming along, working on code and trying to keep up with the demand from a growing user base.

ORIGINS AT STANFORD

Snapchat was born in 2011 on the Stanford University campus, when Spiegel and a pal, Bobby Murphy, presented it to Spiegel's design class. At the time, the media was ripe with stories of former New York representative Anthony Weiner, amid a sexting scandal involving pictures the now-mayoral candidate would have probably liked to have erased forever.

What if embarrassing or silly photos could be viewed, then just disappear?

"You … want to have this place to hang out and be funny and joke around," says Spiegel. "Snapchat provides an opportunity to do that."

The Stanford class wasn't overly enthusiastic.

But that didn't deter them. Spiegel quit school a few credits shy of graduation and moved home to Los Angeles, where he grew up in the tony community of Pacific Palisades. Murphy came along, and they operated Snapchat from the dining room of Spiegel's father's house.

With the recent financing addition from Benchmark, they were able to move out to Venice and spend heavily on more servers to keep up with the growth. (Spiegel still lives at home with his dad, John, an entertainment attorney.)

A Stanford classmate of the Snapchat founders, Frank Reginald Brown, is suing the company, saying he, too, is a co-creator. Snapchat has no comment on the lawsuit.

SNAPPING VS. SEXTING

To use Snapchat, you download the Apple or Android app, find your contacts and start taking photos or videos. You determine how long they can be viewed — from 1 to 10 seconds.

The "snaps" are then deleted from Snapchat servers. But that doesn't mean they always disappear. A recipient can take a screen shot, saving it forever, if they like. Other workarounds have also popped up on the Web.

YouTube is full of videos of Snapchat users making quick, funny faces. There's also a not-suitable-for-work Facebook page called "Snapchat Nudes."

Spiegel insists his service isn't all about sex. Mention Snapchat to consumers, and teens and young adults light up.

Jennifer Yvette Leiva of Anaheim, Calif., enjoys it for the timed photos. "You like to goof around and not have people throw the pictures back in your face," she says.

"It's an easy way to keep in touch with your friends," says Brooke Bower of San Diego.

Snapchat could not have grown "this big, so fast, if all it was was a dirty picture sharing service," says investor Lasky. The Snapchat audience is primarily female, he adds, not the demographic that usually identifies with messaging porn.

Altimeter Group analyst Susan Etlinger says that despite the hype about sexting, that's just a sliver of Snapchat's appeal. The app's immense popularity with teens and college students shows that "people need to have private one-to-one interactions that aren't permanent," Etlinger adds.

The company brings in no revenue now, and Spiegel says his focus for the foreseeable future is on user growth. He hopes to eventually start selling advertising.

"We track engagement, so when you view a snap, we can determine what is valuable branded content," he says. "That's an awesome ad model." He won't give a timetable for this, just that he expects 2013 to be a big year, and that "our focus on growth and product is the way to go."