Snapchat: The World's Hottest App

Bobby Murphy, 25, and Evan Spiegel, 23, have turned Snapchat and its disappearing photos into the hottest app in America for teenagers. Will they become two of the youngest billionaires ever–or fade quickly into business infamy?

THIRTEEN MONTHS AGO Facebook’s Mark Zuckerberg, the richest twentysomething in history, reached out to Snapchat’s Evan Spiegel, who oversees a revenue-less app that makes photos disappear, with an invitation, delivered to his personal e-mail account: Come to Menlo Park and let’s get to know each other. Spiegel, now 23 and the brashest tech wunderkind since, well, Zuckerberg, complete with his own legal battle against a college buddy who helped him start his company, responded to his role model thusly: I’m happy to meet you… if you come to me.

And so, armed with the premise of meeting with architect Frank Gehry about designs for Facebook’s headquarters, Zuckerberg flew to Spiegel’s hometown, Los Angeles, arranging for a private apartment to host the secret sit-down. When Spiegel showed up with his cofounder Bobby Murphy, who serves as Snapchat’s chief technology officer, Zuckerberg had a specific agenda ready. He tried to draw out the partners’ vision for Snapchat–and he described Facebook’s new product, Poke, a mobile app for sharing photos and making them disappear. It would debut in a matter of days. And in case there was any nuance missed, Zuckerberg would soon change the large sign outside its Silicon Valley campus from its iconic thumbs-up “like” symbol to the Poke icon. Remembers Spiegel: “It was basically like, ‘We’re going to crush you.’”

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Spiegel and Murphy immediately returned to their office and ordered a book for each of their six employees: Sun Tzu’s The Art of War.
Snapchat represents the greatest existential threat yet to the Facebook juggernaut. Today’s teens have finally learned the lesson their older siblings failed to grasp: What you post on social media–the good, the bad, the inappropriate–stays there forever. And so they’ve been signing up for Snapchat, with its Mission: Impossible style detonation technology, in droves. FORBES estimates that 50 million people currently use Snapchat. Median age: 18. Facebook, meanwhile, has admittedly seen a decline among teenagers. Its average user is closer to 40. Zuckerberg understood this, which might explain the gamesmanship. When Poke debuted, on Dec. 21, 2012, Zuckerberg e-mailed Spiegel, telling him that he hoped he enjoyed it. Spiegel, who had deactivated his Facebook account, frantically called Murphy for his review. It was, Murphy responded glumly, a near-exact copy.

But a funny thing happened on the way to obsolescence. The day after its launch Poke hit number one on the iPhone app store. But within three days, on Dec. 25, Snapchat had pulled ahead, boosted by the publicity, as the Facebook app disappeared from the top 30. Laughs Spiegel: “It was like, ‘Merry Christmas, Snapchat!’ ”

Which helps explain what happened in the fall when Zuckerberg reengaged Spiegel, basically ready to surrender on terms so generous, on paper, they seemed preposterous: $3 billion in cash, according to people familiar with the offer, for a two-year-old app with no revenue and no timetable for revenue. (Facebook refused to comment for this article.)

Even more preposterous, of course: Spiegel turned Zuck down. It was the most scrutinized business decision of the past year, complete with head-spinning math. FORBES estimates that Spiegel and Murphy each still owned about 25% of Snapchat at the time, which means they were both forgoing a $750 million windfall. “

I can see why it’s strategically valuable,” one leading venture capitalist tells FORBES. “But is it worth $3 billion? Not in any universe I’m aware of.”