SnapChat Turns Down $3 Billion Offer From Facebook

Dr Herbert West writes about a reported $3 billion offer from Facebook that Snapchat CEO Evan Spiegel turned down. "Snapchat, a rapidly growing messaging service, recently spurned an all-cash acquisition offer from Facebook for close to $3 billion or more, according to people briefed on the matter. The offer, and rebuff, came as Snapchat is being wooed by other investors and potential acquirers. Chinese e-commerce giant Tencent Holdings had offered to lead an investment that would value two-year-old Snapchat at $4 billion. Evan Spiegel, Snapchat’s 23-year-old co-founder and CEO, will not likely consider an acquisition or an investment at least until early next year, the people briefed on the matter said. They said Spiegel is hoping Snapchat’s numbers – of users and messages – will grow enough by then to justify an even larger valuation, the people said."

Comments

And the bubble grows larger

[OverlordQ]

~nt~

Re:And the bubble grows larger

[Dr_Barnowl]

Who says they don't? The client deletes the photos. What the server does with them is a trade secret.

Facebook may well have thought $3B an excellent deal to expand their social graph database with all the photos you DON'T post to Facebook because they are too private...

Re:And the bubble grows larger

[gl4ss]

all we have about this is really just snapchat arranged rumours(non sec, non financial laws liable) about it - from a company that sooner or later needs a buyout because the company getting bought out IS THE BUSINESS PLAN. so either him or people who own shares in it arranged this leak - or even more likely they fabricated it. I can't see why facebook would really offer 3 billion for it(they have most of the snapchat users already too, so there's that as well).

now they can go around looking for investors - implying that they have a 3 billion valuation - without actually saying that they're worth 3 billion(which might get them into hot water, lying when trying to secure securities usually tends to be a crime..). they already laid it out that they're probably looking for some investment early next year, so they're already negotiating, for more likely something like another 70-100 million - which with a reasonable look at the company would be all the company is worth(0 revenue), so they're going to be using this to sell let's say 10% of the company for 100 million(which is a bargain if the company really was valued at 3 billion).

with their current business model it's just a question who is the sucker that gets to keep the money burning zero profiting service.

How's that tech bubble working out for you?

[Anonymous Coward]

Zynga, Instagram, Twitter, Snapchat, Skype, and the list keeps on growing.

Investors know the price of everything and the value of nothing.

Re:How's that tech bubble working out for you?

[Mitreya]

Zynga, Instagram, Twitter, Snapchat, Skype, and the list keeps on growing.

I think you forgot Facebook :)

Investors know the price of everything and the value of nothing.

Big investors that got preferential price (and early access to all relevant information) made out just fine. The mere mortal investors might lose money, but that's a feature, not a bug.

Ephemeral is a good word for this

[roman_mir]

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.

- I like the use of word 'ephemeral' to describe all three, the services that this company offers, the supposed customer base for it and the actual value of the company.

I see that it was just offered 3,000,000,000 USD and declined it, which while might be height of arrogance, does not surprise me. I would not be surprised to find out that tomorrow this very company gets picked up for 5,000,000,000 USD. I also would not be surprised to find out 2 years from now that it still is not generating any revenues and 3 years from now that its valuation is down to a few million ephemeral dollars (which by that time could be ephemeral all on their own).

Pretty much can't be surprised about anything in this age of rampant inflation and destruction of actual productive economy by the largest government and government manipulation of money in history.

ads

[Anonymous Coward]

the minute they monetize Snapchat with ads kids will stop using it

They're ALL on crack.

[jcr]

When someone offers you $3B for a company with no revenues and a product that could be duplicated in a week, take the money and RUN.

FB must be brain-dead to offer that much, and Snapchat is insane to turn it down.

-jcr

FTFY

[jrumney]

Snapchat, a rapidly growing messaging service, recently spurned an all-cash acquisition offer from Facebook for close to $3 billion or more, according to people with a vested interest in the company's valuation.

Re:fuck, give it to me!

[jrumney]

Vulture capitalists would never turn down 3 billion dollars. They may be vultures, but they know very well when to cash out.

Valuation is completely skewed..

[spiffmastercow]

I really don't understand how the "new" tech companies command such a high price point for such worthless products. Somehow Twitter is worth more than Redhat, FB is worth more than MS, and Zynga is worth more than EA? I get that there is value in novelty, and that some of the older companies may not be innovating the way they used to, but how is it possible that something trivial like Snapchat is worth more than a couple mil?

Re:Valuation is completely skewed..

[EdIII]

Simple.

With rapidly declining advertising revenues in the traditional distribution channels due to a fundamental shift in the way people are consuming entertainment, there is a massive glut of advertising budgets and an absolute panic in the marketing douchebag asshole fucktard executives world.

Twitter provides massive amounts of data for marketers to masturbate over and determine just what is in our little pea brains at the moment and what we might buy. Value to marketing? HIGH.

Redhat makes operating systems. Value to marketing? LOW.

FB is the poster child for not just marketing data, but the destination for the attention deficit order generation to get their communication fix, consume entertainment, and progressively more and more, obtain news about what goes on in the world. Do I understand it? Not one fucking bit. Shoot me first. Is it valuable to marketing? Apparently extremely valuable. Every business out there is fumbling around with consultants and 3rd party vendors to get a FB presence up and running.

MS makes operating systems, office collaboration software, database systems, a beginning attempt at a phone system, and a complete failure in the entertainment market. Value to marketers? Moderate, and only in the form of crapware.

Zynga is valuable for the same reason as FB.

EA? I dunno about those assholes. Ever since most of those companies went full retard with DLC, DRM, and general stupidity I don't play video games from them anymore. I'm into the indie stuff out there. Surprising quality from most stuff Humble Bundle sells.

Re:Valuation is completely skewed..

[PCM2]

Somehow Twitter is worth more than Redhat, FB is worth more than MS, and Zynga is worth more than EA?

Errr... apparently Twitter IS worth more than Red Hat, but Zynga's market cap is less than half that of EA and Facebook's is less than half that of Microsoft.

The year 2000 called

[future assassin]

they want their bubble back as your offer sucked.

WTF has happened to the world. how the fuck can a chat service be worth 3 billion. You could equip every being in Africa with a generator, gas and the tools to create a new life with that much money,

Re:fuck, give it to me!

[EdIII]

I dunno. There are limits to that kind of approach.

We are talking about $3 billion. With a fucking capital B. How much is Snapchat at now in total investment with the shareholders? If all parties are in for maybe $20 million, that $3 billion starts to look like one hell of a successful exit plan.

I would take the first offer in a split second if it was at a couple hundred times the initial investment. Take it, move on, innovate someplace else.

Unless you had some sort of ideological reason not to. Only thing I can think about is if I created a successful zero-knowledge service with very little competition I would keep it alive for those reasons. Snapchat does not qualify for that. It's a fad and they should know it.

My children are using it

[Anonymous Coward]

Never heard of SnapChat before

I've heard of it because my children are using it

It's basking in it's 15-minute worth of glory

If that guy isn't selling now, I don't think he will have a lot of time left before someone deflate that 3Billion price tag

Re:My children are using it

[Dogtanian]

I've heard of it because my children are using it It's basking in it's 15-minute worth of glory

I've heard of it, but never used it. I know that it's an app that lets you send images ("snaps") to others that appear on their phone for a number of seconds before allegedly disappearing irretrievably. (*) That's it. It sounds like a "tens of millions of dollars if it *really* takes off" business, not a $3bn one.

Yes, I appreciate that with these things, it's as much the established user base that's more important, but I don't see how this can have the all-encompassing network effect that will lock users in to the same extent as with Facebook itself. It's not like your social life is going to end if you stop using it (or have I missed something?) and it's a one trick pony that's vulnerable to becoming boring- and abandoned- by the notoriously fickle teenage demographic who are its primary users. What's stopping anyone else from doing something similar or better?

So, yeah. It's definitely not worth $3bn, and this is definitely "bubble" territory. The guy no doubt thinks he'll get more from other people- personally, if I was in his position, I'd take the money and run even if there was a possibility of $4bn... the possibility of the bubble bursting before you see that and the company losing 90% of its value is a real possibility.

Especially if the obvious hole in the deletion mechanism becomes more widely known and more widely exploited and/or a story breaks that the images *aren't* being deleted from Snapchat's servers after downloading as they claim and/or someone else has access to them, e.g. the NSA. While 14-year-olds sending underage nude pics of themselves to their girl/boyfriend won't be bothered about the legality, they might be more put off by the fact that they're out there permanently or being viewed by some middle-aged guy in a government agency. (The "old enough to be their Dad" bit being applicable here, not the government).

(*) Because we all know that once you've uploaded something to another user's device that's out of your control, there's no prospect of them getting round the auto-deletion, except where there is, and I heard of workarounds some time back.

Re:fuck, give it to me!

[aendeuryu]

This sounds a lot like the advice Groupon got.

Reminds of the time when Yahoo turned down $47.5B

[linuxguy]

Reminds of the time when Yahoo turned down $47.5B from Microsoft in 2008. They have regretted it since.

They're trying to be the next Groupon!

[billstewart]

Google reportedly offered Groupon $6B and was turned down; the company's probably worth about $6 by now.

Facebook offered SnapChat $3B? As long as it's in cash, not Facebook stock, there's only one right thing to do, which is to take the money and run. (Or take the money and stick around, if that's the deal, but take the money. Do not play Go, Do not pass up $3B.

Re:They're trying to be the next Groupon!

[Anonymous Coward]

Right, because market cap is be-all and end-all metric of company's worth, especially when considering acquisition.