Chump Change: Snapchat Reportedly Rejected $3 Billion Buyout From Facebook
Take a moment to clean the coffee off your monitor, we'll wait. Got it all wiped up? Okay, let's continue. According to The Wall Street Journal and people it spoke with that have been briefed on the matter, this was an all-cash offer. How in the world do you turn down that kind of money for an app that, at present, isn't generating any revenue?
Part of the reason is because Facebook isn't the only entity interested in Snapchat. There are other companies interested in making an acquisition, as well as investors willing to pour more cash into the startup. Tencent Holdings, a Chinese Internet firm, wants to lead an investment that would value Snapchat at around $4 billion.
Let's back up a moment. If you've never heard of Snapchat or played with the app, it's essentially an instant messaging tool, but with a twist. Rather than text back and forth, you snap pictures or videos and send them to friends. You can type brief messages on the photos and videos, as well as draw with your finger. The recipient can then view it for up to 10 seconds before it disappears forever (the sender is notified if the recipient takes a screenshot).
It's an incredibly simple concept, and hugely popular, especially among the teenage crowd. Believe it or not, teens by and large aren't using it for so-called "sexting," but simply as a fun way of sending messages back and forth. This is the latest social phenomena and, like Instagram, the concept has caught fire.
Even still, spurning a $3 billion buyout offer is a calculated gamble. Snapchat's founders and any outspoken investors whispering in their ears feel that there's a potential to make lots of cash as a standalone company. It wouldn't have to come in the form of banner ads, but perhaps by giving users the option of befriending companies, which in turn would send Snapchat ads or coupons. There's room to be creative in a mobile market that's already huge, and expanding.