October 21, 2014

SnapChat Turns Down $3 Billion From Facebook

Snapchat_logo

Not many entrepreneurs will ever see a $3 billion buyout offer from a company like Facebook. So imagine getting such an offer in cash from the social media giant. Then imagine deciding to turn down that offer –  even though your company isn’t making any money at all.

Well, 23-year-old Evan Spiegel, CEO and Co-Founder of mobile app SnapChat, apparently has done just that. In fact, media reports say Spiegel has been approached twice by the bigger company with very lucrative offers. But he just said, no thanks.

So what’s the story with this guy, is he nuts?

Well, experts don’t think so.

First, SnapChat is a new breed of photo sharing/instant messaging service where images and messages are seen only by designated friends or connections. They can be viewed only once for 10 seconds or less before being deleted forever.

Here’s a closer look at how SnapChat works:


So why’s Facebook so interested in the service? Well, The Wall Street Journal reports:

“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.”

SnapChat has that audience. Sources say 13 percent of teens between 13 and 18 use the app. That’s compared to 4 percent of adults between 19 and 25.

What’s more, that audience is steadily growing with 350 million snaps a day currently, up from 200 million a day in June. Investors have been lining up to give Spiegel their money. There’s little doubt Facebook will be back — perhaps with an even bigger offer.

For other entrepreneurs, the lesson is simple. Know what your business is worth from the beginning. This will keep you from settling for less.

Image: Wikipedia

16 Comments ▼

Shawn Hessinger - Editor


Shawn Hessinger Shawn Hessinger is the Editor for Small Business Trends. He is a journalist and social media networker with more than a decade of experience in the traditional newspaper business before moving to the digital world. He was the former community manager of BizSugar and the former community editor at AllAnalytics, a site dedicated to professionals in the business intelligence and analytics community.

16 Reactions

  1. In the photo sharing space SnapChat is huge. Nearly as many photos/day are being shared there as on Facebook. Looking back, buying Instagram for $1 billion was a great deal so I’m not surprised they made a move for SnapChat.

    However, I think that SnapChat is crazy for not taking the money. I see now conceivable revenue model that could ever make them more money and it was all cash. Time will tell.

  2. I think it is just because he knows the value of his company and that it will grow bigger. After all, they will not offer him some money that big if it they are not going to make more than that. Although these companies have the means to promote such a service. I guess Spiegel just believes in what he has.

  3. So, did Spiegel turn down the offer from Facebook because he considers his company to be worth more than what was offered or because he didn’t want Facebook getting its hands on it?

    I’m not clear.

    I mean, maybe he doesn’t like FB, doesn’t want SnapChat bought out/assimilated by a company like FB, and no amount of money will sway him to do so.

  4. He’s gonna regret turning down billions!!!!!

    • Janet,

      I’m not sure whether he’s gonna regret his decision or not, but if it were me, I’m not sure I will turn down that offer.

      Remember what happened with Groupon? They turned down Google’s $6bn. offer and look what happened to once-mega-popular coupon sites. Still doing well, but it has passed its prime.

      Snapchat is life hacking; but is it a fad or is it a real solution which will stand the test of time?

      To be honest with you, “standing the test of time” is challenging in the startup world.

      I’m old school; I focus on cash flow. When a business is valued at $3bn. but make little or no positive cash flow, I can’t see it’s a good investment.

      • Janet, maybe he won’t regret it. It all depends on the reasons for his decision. If we focus on just the money (which is a huge lot of dough), then I can see how it might be considered to be a bad decision turning the offer down. But there might very well be other factors at play which we’re unaware of.

  5. Good for Evan!!! Keepin’ it real!
    I believe the world needs more people like Evan!! :)

    FB will probably chop up SnapChat for it’s own personal purpose. Next thing you know SnapChats that are meant to be seen only for 10 seconds will be copied and used by people half way around the globe without any permissions… We all know how that goes with FB.

    • Vanessa, I smiled myself when I initially read the blog title. It made me think, “Dear Facebook. You can’t buy everybody.”

      However, that’s just me projecting. For all I know (or don’t know, as the case may be), perhaps Evan wanted more.

      In any case, I’d be curious to know why he actually turned FB’s offer down though.

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