WTF Are You Thinking, Snapchat?

Snapchat founders Evan Spiegel and Bobby Murphy

It’s been a while since I’ve blogged but I’m just a little outraged at the moment and I need to let it out.  Snapchat’s 23-year old co-founder and CEO, Evan Spiegel, gets offered $3 BILLION (with a B!!) in cash from Facebook, and the kid turns it down?  Who do these kids think they are?

I don’t even understand how this kid is eating and paying bills now.  Even with millions of users, Snapchat has yet to make a single dollar of revenue, and it has not shown any clear strategy of how they plan to be profitable.  The company’s founders are also in a controversy over whether they did or did not cheat a friend out of his fair share.

Spiegel’s obviously holding out for a bigger payday, as Snapchat has been getting some serious attention from other investors and potential acquirers, such as Chinese e-commerce company Tencent Holdings.  Tencent supposedly offered to lead an investment that would’ve valued Snapchat at $4 billion, but Spiegel might be waiting for something even bigger than that.  According to anonymous sources, “Evan Spiegel, will not likely consider an acquisition or an investment at least until early next year. … Spiegel is hoping Snapchat’s numbers … will grow enough by then to justify an even larger valuation.”

This isn’t the first time that Facebook has tried to acquire Snapchat.  Last year Facebook reportedly offered Snapchat a $1 billion buyout.  After they were denied, Facebook took a stab at creating its own ephemeral messaging app- anyone remember Poke?  Probably not, as it was a flop.

I certainly respect holding out for what you think you’re worth to a certain extent.  But when Mark Zuckerberg offers you a room full of cash-filled suitcases, you take the money, say thank you and move the fuck on!  Go travel the world, kid.  Buy your parents a nice house.  Start a new project.  What is $4 billion really going to buy you that $3 billion can’t?

Some people say that we shouldn’t be calling Spiegel and the guys at Snapchat crazy for turning down Facebook’s cash offer. A writer at CNN thinks the company was smart to hold out because it has something other social media services don’t: erasable messages.  So what?  Snapchat’s erasable messages are cool today, but next week something else will be the hot new thing. After all, it is the teens and young people who use the app, and we all know how fickle this age group is.  I think it’s a pretty big gamble for Spiegel to wait until next year, especially when this is $3 BILLION (again, with a B!!) at stake.

It might be possible for the guys at Snapchat to get more money from the competition between prospective investors and would-be acquirers, but I don’t think it’s worth the risk of overplaying their hand and crashing and burning.  Either way, it should be an interesting next few months for Snapchat and I can’t wait to see how this all plays out.

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2 thoughts on “WTF Are You Thinking, Snapchat?

  1. The 3 Billion is a mere prospective buying price. And it’s not a number that was made up all whilly-nilly. Revenue isn’t the only item that’s considered when companies make a buy-out offer. Many times companies (Facebook in this case) forecasts the potential profit of a business (Snapchat in this case). They look at the companies assets, opportunity, business environment, growth, and potential return too! They see that Snapchat has soooo much potential that they are willing to pay said amount of money. And if they’re willing to pay 3 Billion than they are anticipating making wayyyy more off of it once they acquire it. Perhaps they see a future merger, greater advertising revenues, or opening it on the stock exchange (this alone could make plenty of money, if its successful). Long story short, just because a company has no revenue does NOT mean is doesn’t have any potential, and that is why Facebook is willing to pay.

  2. Casey says:

    I completely agree with you on how they came to the price of $3 billion (by seeing the potential despite revenue). My argument is that these kids are crazy not to take the money. I hope holding out is worth it for them!

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Casey Kurlander, Search marketing Specialist, BMI Elite