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Snapchat turned down Facebook’s $3B acquisition offer because …

Snapchat co-founder and CEO Evan Spiegel now shares the team’s rationale for declining.

Snapchat CEO Evan Spiegel AP

In 2013, Facebook had been courting Snapchat with a proposed acquisition, reportedly for $3 billion in cash, and netting co-founders Evan Spiegel (pictured above) and Bobby Murphy about $750 million each from their own equity in the tech startup. The proposed acquisition story even included an animated report of how Facebook co-founder and CEO Mark Zuckerberg himself flew in to meet Snapchat’s co-founders to personally make an offer.

Last November, however, Snapchat reportedly turned town the offer, although it had been mum about its reasons for shunning what could have been the biggest tech acquisition of the year.

In a recent interview with Forbes, Spiegel offers some insight on why the team decided to refuse the acquisition offer, citing a bigger potential value if the secret chatting service were to run as its own business rather than being part of another social network.

“There are a very few people in the world who get to build a business like this,” Spiegel shared with Forbes. “I think that trading that for some short-term gain isn’t very interesting.”

The first acquisition offer actually included what can be constituted as a threat. Back then, Facebook was also developing its own disappearing-message service, called Poke, which promptly launched after Snapchat first rebuffed Facebook’s acquisition offer. The app’s success was short-lived, however. After reaching the top spot on the iTunes App Store at launch, Snapchat then overtook it quite quickly, with its popularity fueled by interest in self-destructing messages.

To date, Snapchat has about 50 million active users, with a median age of 18. In contrast, Facebook is reportedly struggling to keep the teenage demographic engaged. Snapchat has also raised several rounds of funding, with the latest at $50 million this December, at an almost $2 billion valuation.

The next challenge for Snapchat is to find a way to monetize its service. Options include in-app purchase of premium content, in-app advertising, and the like — something similar to how chat apps like Line, WeChat and Kakao Talk monetize their services. With this concern, analysts say that Snapchat’s refusal of $3 billlion could either be the “next great social media IPO,” or a “$3 billion disappearing act.”

Source: Forbes / Image credit: AP

J. Angelo Racoma
J. Angelo Racoma has written extensively about mobile, social media, enterprise apps and startups. Angelo develops business case studies for Microsoft enterprise applications and services. He is also co-founder at WorkSmartr, a small outsourcing team.

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