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Yahoo is reportedly preparing to invest £12 million ($20 million) in Snapchat.

Despite not yet having a source of revenue, more than 100 million users use the app - which is apparently enough to convince companies to spend vast sums out on the three-year old startup.

Yahoo's move follows an almost identical investment from venture capital firm Kleiner Perkins Caufield and Byer in August.

The Wall Street Journal reports that California-based Yahoo (CEO Marissa Mayer shown making her keynote address in January 2014) will invest £12 million ($20 million) in the three year-old tech startup Snapchat. If true the investment would value the company at £6 billion ($10 billion)

The move comes after a similar, albeit much larger, investment in Chinese technology firm Alibaba reaped huge dividends for Yahoo, with its $1 billion investment in 40 per cent of the company in 2005 now valued at tens of billions of dollars.

This latest move, according to the Wall Street Journal, comes as Snapchat starts to seek funding from venture-capital firms, money managers and companies. 

Snapchat may be a key partner to Yahoo as it gets set to release Snapchat Discovery next year.

This is a rumoured service that will display brief ads alongside news and video clips on the app, which will likely become a key source of revenue for Snapchat.

Snapchat Discovery would provide a platform for Yahoo to distribute its own content.

However, the £6 billion ($10 billion) valuation of a company that hasn't, yet, monetised its users, has been dubbed a risky proposition.

That's not to say it hasn't worked before; Microsoft's 2007 investment in Facebook valued the then three-year old company at £9.4 billion ($15 billion), and later proved hugely successful.

Last year Snapchat infamously turned down a £1.8 billion ($3 billion) offer from Facebook - a decision that left many stunned.

But the move seems to have paid off, as Snapchat's owners Evan Spiegel and Bobby Murphy are set to become billionaires according to the current valuations of the company.

If the valuation holds true, Snapchat would join a select club of tech startups with valuations of £6 billion ($10 billion) or more, including car-ride service Uber and rooms-to-let startup AirBnB.

Yahoo's move follows an almost identical investment from venture capital firm Kleiner Perkins Caufield and Byer in August this year. However Snapchat is still yet to announce how it plans to make revenue from its more than 100 million users. Pictured are owners Evan Spiegel, left, and Bobby Murphy

Snapchat lets users send photo-messages that vanish within seconds, but is expected to soon begin offering advertising or branch out into additional services.

This may include the ability to send instant money transfers to other users.

Although Snapchat, and other similar mobile messaging apps, don't have established business models yet, its rapid user growth and perceptions of advertising potential have aroused intense investor interest over the past year or so.

Snapchat is continuing to grow in popularity, with people sending more than 700 million disappearing messages a day.

In June, Facebook launched a similar app called Slingshot in the hope of replicating Snapchat's success.

The app lets consumers exchange photos and videos, which later disappear, without requiring Facebook accounts.

But despite its rapid growth, Snapchat has had a number of obstacles to contend with.

The group this year settled charges with US regulators, which accused it of deceiving consumers by promising that photos sent on its service disappeared forever after a period of time.

According to the Federal Trade Commission at the time, photos sent on Snapchat could, in fact, be saved by recipients using several methods, such as taking a screenshot.