The incredibly popular Snapchat is making headlines today after its creators turned down Facebook’s offer of a reported €2.2 billion to acquire the company. It’s proof of how valuable the app is perceived to be, but the rejection has reignited debate over how valuable the company actually is.

Here’s a quick guide to Snapchat, and a few reasons why its uncertain future is of so much interest to investors and financial analysts:

1. What is Snapchat?

Teenagers around the world will be rolling their eyes at the question, as will the ever increasing amount of older users installing the app. But just in case you don’t know, here’s a very brief primer.

With Snapchat, the user takes a photo or video which they then send to any chosen recipient. They set an amount of time - between 1 and 10 seconds, currently - for which the receiver can look at the image (or ‘snaps’). After the allocated time, the snap is automatically deleted from both the receiver’s device and the Snapchat servers.

2. Can’t you just screenshot the photo?

One of the cleverer features of the app is that a virtual button on the screen needs to held down in order to view the photo, meaning screenshots are more awkward to take. Of course, it’s still possible, but the app alerts the sender if the recipient has indeed taken a screenshot. It's not the perfect solution, but a good indicator that you probably should block or not send any ‘compromising’ images to the person in question in the future.

3. How popular is Snapchat?

Extraordinarily popular. The most recent figures suggest 350 million snaps are sent a day. It doesn’t specify how many of these are selfies, but rest assured it’s a lot. It also marks a huge 50% increase on the 200 million daily photos shared in June.

The company does not release demographic information, but the app is particularly popular among teenagers and young adults. It’s only growing in popularity among other groups, though, with figures released in June estimating 8 million adult Snapchat users - a number which will have increased significantly since then.

4. How valuable is the company?

In the last year alone, different estimates have valued the company at wildly varying amounts, from €45 million in February to €640 million in July. The €2.2 billion Facebook offer indicates the company's predicted worth has increased exponentially in a very short time.

Although Snapchat has managed to secure several major investments - a funding round earlier this year made them approximately €45 million - the Snapchat creators (led by 23-year-old CEO Evan Spiegel) have repeatedly stated they do not want to be acquired - a sentiment, for now, backed up by their rejection of the Facebook deal.

5. How does it make money?

Here’s the thing: it doesn’t, at least not at the moment. The company might be highly valued, but they’ve yet to implement any major revenue plans. Snapchat has been loss making, and has suffered self-confessed ‘scaling’ issues as it grew more and more popular in 2012. Critics are sceptical whether the almost inevitable advertising will be able to support the costs of running the data-intensive business, let alone achieve profitability. Compounding concerns is the largely teenage audience, who perhaps will not be a reliable source for ensuring advertising and premium service revenues in the long-term. Like many popular services, implementing advertising threatens alienating users who have adjusted to free, uninterrupted use.

Given its wild popularity, however, many investors - Facebook included - seem keen to invest in Snapchat as it quickly proves itself to be the ‘next big thing’: other social networks even fearing it’s taking away their own users away.

Forbes’ Robert Hof is optimistic of Snapchat’s opportunities for money-making, suggesting the sale of ‘virtual stickers’ and other paid extras could ultimately supplement ad revenue. But he also warns that “given the rapid proliferation of social networking services in just the last few years–Instagram, WeChat, Vine, Whatsapp, Tumblr–it’s reasonable to assume that another shiny new social object could supplant Snapchat next year”

6. Any other controversies?

Of course. Some parents and other observers are concerned about the app’s potential for sharing sexually explicit content. One poll by VoucherCodesPro revealed 47% of 18 to 30 year-old Snapchat users had received nude images, increasing to 67% for “inappropriate poses or gestures”. 

It remains unclear how retrievable ‘erased’ Snapchat photos are if the company is issued with search warrants or other legal challenges. The team advise users “with the right forensic tools, it’s sometimes possible to retrieve data after it has been deleted. So… you know… keep that in mind before putting any state secrets in your selfies”. Unopened snaps, meanwhile, remain on servers for 30 days, and Snapchat has confirmed some of these have been handed to authorities on legal request ('about a dozen' since May 2013).

And it wouldn’t be a wildly popular tech start-up without some internal conflict. Frank Reginald Brown has brought a multi-million dollar lawsuit against the site’s co-founders, suggesting he helped conceive and develop the application before being ousted from the company.