Snapchat to Facebook: Oh Snap! Thanks but No Thanks, We're Not Selling!
Facebook may want social media-domination, but they need to keep teens interested and engaged to do so. When the world's largest social network noticed that teens' usage is on the decline, and the increasingly popular messaging service, Snapchat, is on the rise, they had to act snappy and make an enticing offer.
An all-cash acquisition offer from Facebook for close to $3 billion or more was made to purchase Snapchat, according to The Wall Street Journal. But it was an offer that Snapchat could refuse - and the company is not selling.
The Los Angeles-based company, which is only two years old, was founded by 23-year-old Evan Spiegel. Reportedly, Spiegel will not likely consider an acquisition or an investment at least until early next year in the hopes that the numbers of users and messages will grow enough by then to justify an even larger valuation.
What does Snapchat do?
"Snapchat specializes in ephemeral mobile messages, including text or photographs that disappear after a few seconds. The service has not generated any revenue, but is especially popular among teenagers and young adults, who use the app to send messages to friends," according to the WSJ.
Snapchat has also been portrayed negatively in the headlines. Critics say that due to the quick-erasing nature of the app, it can increase sexting and cyberbullying and that it is embroiled in privacy issues, lawsuits and controversy.
What's the draw to Facebook?
"Facebook is interested in Snapchat because more of its users are tapping the service via smartphones, where messaging is a core function. Facebook has rapidly increased the share of its revenue coming from mobile advertising, but said last month that fewer young teens were using the service on a daily basis," the WSJ added.
Facebook, which is valued at $100 billion, isn't the only company trying to woo Snapchat, however. Other investors and potential acquirers also want a pie of the social media pie. Chinese e-commerce giant Tencent Holdings had offered to lead an investment that would value Snapchat at $4 billion.
Other social media and mobile-messaging contenders have a pretty hefty price-tag as well.
"Twitter, an unprofitable short-messaging service, is valued at roughly $25 billion after its initial public offering last week. Pinterest, an image-sharing app, last month raised $225 million from investors who valued the company, which also has no revenue, at $3.8 billion."
According to USA Today, Facebook purchased Instagram for $1 billion last year in what was seen as a defensive move to grab the photo app popular with teens. Instagram is a small team of developers with fewer than 30 employees; Snapchat is estimated to also have a small group of employees.
Was this an overall good move on Snapchat's part? Forbes says it was, and that the company "has the potential to build something much bigger and the management has so far demonstrated that they have the chops and ambition to get this done."
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