Snapchat, the wildly chat messaging app that allows users to set a time limit for how long or short an image or video they send can be viewed, closed a $60 million round of Series B funding led by Institutional Venture Partners, with participation from General Catalyst Partners and SV Angel, and continued pro-rata participation from Benchmark Capital and Lightspeed Venture Partners.

Aside from that, Sony Entertainment CEO Michael Lynton will be joining Snapchat’s board as an independent member. The new round of funding will be used to build servers, hire people and further innovate, said Snapchat in a statement.

The company is now valued at $800 million – quite intriguing given the fact that it has no means of revenue at all, but things may soon change as Snapchat recently hired Philippe Browning as VP of Monetization – since his appointment, the chat app is apparently looking into in-app purchases and native advertising.

This isn’t the first time that a company which doesn’t actually generate money has been so highly valued. Readers may well recall, Facebook valued Instagram at $1 billion but ended up buying it for $715 million because its stock price fell. Still, $715M is a huge price tag for something that doesn’t generate so much as a dime in revenue.

Why So Much?

For Instagram, the fact that it’s not improving its app to generate money but rather to make people happy is what makes it so valuable.  Instagram CEO Kevin Systrom was dedicated to creating something that users would love rather than make something that he could profit from.  And now that it’s part of Facebook, the social media giant has been left to solve the monetization headache, freeing up Systrom and his team to focus on making Instagram even better.

Snapchat has kept mum about its user-base, but it’s thought to have users numbering in the millions. It currently boasts of 200 million photos and videos upload and shared by its users on a daily basis, up from the 150 million photos taken daily that was reported in April.  If acquired and used properly, the app could potentially generate millions or even billions of dollars.

Though Snapchat is looking for ways to monetize, co-founder Evan Spiegel stated that this is unlikely to happen soon.  Facebook is said to be eyeing Snapchat but the company insists its not looking to be acquired.  As such, it’s fair to question how long its $800M valuation is going to last without it generating any cash.

“[I]t’s hard to see how Snapchat could maintain that valuation for the long term. There’s a larger point here about how many consumer-facing web startups currently operate: Get big fast, get acquired, and let someone else sort out the revenue side,” said Christopher Mims of Quartz.

We don’t know the real reason why Snapchat turned down Facebook’s offer. It could be that it’s looking for a better price – one Facebook cannot afford considering it’s current state, but one that the likes of Yahoo, which has been on a shopping spree snapping up all kinds of mobile ad-ons lately, could.  Also, if Yahoo is able to snag Snapchat, this could do wonders to its Yahoo Messenger app, or better yet, kill YM entirely and replace it with Snapchat.