Facebook is no stranger to making major acquisitions as it did last year when it bought the popular photo- sharing Instagram for $1 billion. Now CEO Mark Zuckerberg and Facebook are trying to acquire the latest popular photo app, but it seems as though their money isn’t good enough. Snapchat, an app that allows users to send messages and photos that disappear in 10 seconds, rejected Facebook’s offer of 3 billion for the company.
According to businessweek.com:
“The days when a billion dollars was enough to impress a fictional version of Sean Parker are long gone. Now apparently even $3 billion isn’t cool enough for the heady young entrepreneur behind Snapchat.
“The Wall Street Journal reported Wednesday that the startup responsible for the disappearing-message craze turned down an all-cash offer from Facebook and will not consider any acquisitions or investments until at least early next year. It’s very possible Snapchat will crash and burn before ever getting its hands on so many zeros again. The app doesn’t make any money, it’s caught up in a controversy over whether its founders cheated a friend out of his fair share, and almost no one who has graduated college gets it at all. Cue the anticipatory schadenfreude.”
While many people over the age of 21 may have never heard of Snapchat, it is very popular among America’s teenage demographic. However to turn down an offer of $3 billion seems almost crazy, especially since the company hasn’t made any money.
Even though $3 billion may seem like an expensive offer, it makes sense from Facebook’s standpoint.
As reported by forbes.com:
“For Facebook, here’s an easy way to justify that math: Between the close of Nasdaq trading on Oct. 30 and the opening on Oct. 31, Facebook shares lost about 3 percent of their value. In between, Facebook CFO David Ebersman admitted on the company’s third-quarter earnings call that the number of daily users who are young teens has been slipping.
“The kids who are losing their passion for Facebook are pretty much exactly the same ones who are flocking to Snapchat by the millions. While it has never revealed its user count, my colleague J.J. Colao says it likely has around 26 million users in the U.S., if the results of a recent Pew survey are anything to go by. More impressive, 26 percent of adults between the ages of 18 and 29 say they use it.”
Snapchat may be popular amongst the younger demographic that Facebook needs to target, but usually when companies turn down a deal that is this good, it rarely ends up getting a deal that is equal or better in the future. Snapchat will now have to prove that it is worth more than what Facebook offered them
