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Snapchat hack may have just cost the company founder $4 billion


As many as 4.6 million users of Snapchat have had their usernames and phone numbers downloaded by a website calling itself SnapchatDB.info. That may be fewer than 10% of the total Snapchat user base but the security breach could end up costing founder Evan Spiegel and other investors in the so-called “sexting” app billions of dollars.

Snapchat is an app that lets users send text messages, pictures, and videos that self-destruct just seconds after being received. The messages can’t be stored on incoming phones or devices and are erased from Snapchat’s off-site servers immediately. That means there’s no potentially incriminating or embarrassing evidence left behind for snoopy spouses or anyone else looking to peruse your selfies or texts. 

Spiegel and his Stanford fraternity buddies reportedly invented Snapchat as a way to “sext” co-eds with impunity but the app has since expanded well beyond naughty college kids. According the company, Snapchat processed 350 million messages last September, up about six-fold from the prior February.  Since the leak didn’t become public knowledge until January 1 there’s little evidence that Snapchat traffic isn’t going to come to screeching halt based on the leak. 

Most users probably don’t much care if they’re exposed as being Snapchat users. For another, the leak included not the snaps themselves but just usernames and phone numbers. The possibly incriminating, or at the very least embarrassing texts weren’t revealed. There’s no evidence suggesting the snaps weren’t in fact deleted just as Snapchat claims.

So why is Snapchat’s valuation and credibility in danger? According to Australian-based Gibson Security it had already explained the vulnerability to Snapchat before the identities were released. Worse still Gibson says the problem still exists.

Snapchat seems laid-back about the issue. The company issued a snarky statement expressing its gratitude for the individuals who helped bring the problems to Snapchat’s attention.

Sophomoric responses are fine for app start-ups but privacy and anonymity are the entire point of Snapchat on a wider scale. If the company is this easiliy hacked by a group whose single motivation seems to be embarrassing the company, what happens when a group with more nefarious intentions starts targeting Snapchat data?

Last fall Spiegel reportedly turned down as much as $3 billion from Facebook (FB) and $4 billion from Google (GOOG).  The basis of the offers was Snapchat’s coolness with the kids and potential for grown-ups. If Snapchat is as vulnerable as it appears from a security perspective, offers no anonymity, and retains no useful information about its user network it’s not at all clear what if any value the service has beyond critical mass in terms of user base.

If the Internet has taught us anything about user masses its that they tend to be fickle. It doesn’t take much for an app to lose its mojo and there’s another "Next Big Thing" right around the corner.

Snapchat’s breach and response call into question whether Spiegel is a Zuckerbergian wunderkind or 23-year old wiseass. If its the latter it calls into question whether Snapchat has much to offer beyond fleeting appeal and buzz.

Until he proves otherwise Evan Spiegel is looking like a guy who turned down $4 billion for a company that just lost its reason to exist. That being the case we’ve got an early leader for biggest loser of 2014.