Early rumors of a $75 million round for the anonymous messaging app Yik Yak that were first reported by TechCrunch turned out to be a $62 million round led by Sequoia Capital. Though there is no official statement of the round, TechCrunch dug up the SEC filing yesterday.
It’s the second funding round for Yik Yak this year, having raised a $10 million Series A in June led by DCM.
From the start Yik Yak made people’s eyebrows raise, mine included. An anonymous messaging app for students seemed to be an invitation for disaster, making it easy for bullies to target their next victims.
TechCrunch just reported on a copycat app called After School that was banned from the iTunes App Store today due to cyberbullying and bomb threats posted using the app. The app also targeted high schoolers, a demographic Yik Yak pro-actively banned from using the service earlier this year as a result of similar events.
In the end, the way Yik Yak managed to more or less contain cyberbullying through geo-fencing and other precautions to prevent younger users to access the network while still maintaining a fast growth track has surely been one reason the team attracted sizeable investments.
Nevertheless, $62 million for a messaging app that lets college and university students post anonymous updates that can be seen by everyone in a 1.5 mile radius must be a sign of a tech bubble, right? It’s either this or another clever bet by Sequoia as it surely is not about what Yik Yak is today but about what it might become.
First of all, I find it very hard to understand the need for Yik Yak, and I suppose this is a generational issue. The app seems to make a lot of sense to college students though as the adoption rate of Yik Yak does not show signs of a slowdown, and it now covers 1.000 colleges and universities in the US.
Taking a look at Sequoia’s portfolio you will find a ton of tech companies that in their early days surely didn’t look like the next big thing. Apple, Google, LinkedIn, YouTube, Zappos, Instagram and PayPal are only the tip of the iceberg. And even though Sequoia missed out on Facebook the fund already turned a profit on the social network twice as it acquired Instagram for $1 billion and WhatsApp for $22 billion. The latter racked in a return of over $3 billion from a $60 million investment.
Is Yik Yak the new WhatsApp?
Hence, there is of course speculation if Sequoia thinks that Yik Yak might turn out to be a second WhatsApp. Jim Goetz, the partner who made the deal with WhatsApp will now also join Yik Yak’s board of directors.
Is Yik Yak the new Facebook?
I think here it gets really interesting. In an interview with GigaOm’s Carmel DeAmicis in October, Buffington and Droll stated they were building Twitter for the next generation. And the way Yik Yak works today is indeed pretty similar to Twitter’s stream of updates.
The major difference is that updates are tied to certain locations which makes Yik Yak a hyper-local version of Twitter which could be used in many ways to drive revenue down the line. If a student shares an update about a craving for tacos, restaurants in a 1.5 mile radius could offer coupons to give you just one fairly obvious use case.
Like Facebook pivoted from a location based social network for universities into a global social network, it is not that much of a stretch to predict the same for Yik Yak. It has the potential to become the next big social platform, natively mobile and anonymous.
Mobile First and Anonymous
Facebook is currently having a hard time making the switch from web based app to mobile. If unbundling its different services like messenger and groups on mobile devices will help Facebook to stay relevant is one question, the other one being whether its users still trust the company with their data.
In every survey about trustworthiness and customer happiness Facebook is getting bad results. The only reason people still use it is because their contacts are on there, as well. Looking at the fast growth of Yik Yak one can see that this does not need to be the case five years from now.
One of the reasons Facebook acquired Instagram and WhatsApp was to prevent users from switching to other forms of social networking, may it be around pictures or messaging and the more users Yik Yak will attract, the more relevant it will become over time.
Which leaves us with three scenarios. Either Facebook will shell out a couple of billions and acquire another potential heir to the social network throne, Yik Yak will become a fierce competitor for Facebook, or it will burn out and die.
Further Reading
- Yik Yak Is Close To Closing On Roughly $75 Million | TechCrunch
- Yik Yak, Big in Schools, Is a Hit With Investors Too | WSJ
- Yik Yak’s New Funding Round Confirmed As Sequoia Leads $61M Investment | TechCrunch
- Yik Yak raises funding to face a surprising competitor: Twitter | GigaOm
- The dark horse rises: Could Yik Yak be the real winner among anonymity apps? | GigaOm
- Yakety Sax: Why Yik Yak's Huge New Funding Round Isn't As Ridiculous As It Sounds | Fast Company
- After School Is The Latest Anonymous App Resulting In Student Cyberbullying And School Threats | TechCrunch