Why is SnapChat so important (that they can reject $3 billion buyout from Facebook?)

I first ignored SnapChat thinking it was just another 'me-too' version of WhatsApp. But when Facebook is willing to bet $3 billion on them; SnapChat is definitely something we can't ignore anymore. What's more surprising is that the founders of SnapChat have declined $3 billion buyout offer from Facebook! Wow! SnapChat's backers, Tencent (Chinese) thinks that it's worth at least $4 billion and are now waiting for the next buyers (I'm guessing Google or Microsoft will pick them up).

Those who don't know about SnapChat will be surprised to know how simple this app is. It allows you to send a snap of yours or a drawing or any 'snap' to your friends and then decide how long will that 'snap' remain on friend's mobile. After the set time limit, the snap will auto delete from the app and also from SnapChat's servers.

No big deal about it; but the app's been able to gather millions of users in a short period of time. Of course Teens are no longer 'interested' in Facebook and have already began looking for alternatives to Facebook. Facebook must maintain their lead by acquiring fastest growing startups that play in the photo sharing domain. Facebook had earlier bought Instagram which rose to phenomenal heights in short period of time.

Do you think SnapChat is really worth $3 billion (or $4 billion)? Why is an auto photo deleting app so important, if it is, at all?


  • Satya Swaroop Dash
    Satya Swaroop Dash
    The purpose of Snap-Chat is kind of sinister. It is being used to send embarrassing photos of your friends and the unsuspecting victim does not get a chance to take down the picture like he/she might be able to do on Facebook. Plus the auto deletion feature makes it a perfect way of communicating covertly as Snap-Chat claims that it permanently deletes the photo from its servers once the user activates the self destruct feature. There are few apps in the Google Play Store which enable you to save the images from Snap-Chat and Snap-Chat even admits that users will be able to use the screenshot feature on their smartphones to grab a copy.

    Statement from SnapChat goes like this:

    Please note: even though snaps are are deleted from our servers after they are viewed, we cannot prevent the recipient(s) from capturing and saving the message by taking a screenshot or using an image capture device.
    The reason why Snap-Chat is worth a lot of money is because of its simplicity. Teenagers love it because their parents and relatives haven’t yet “discovered it” and plus the images are only shared among the desired list of contacts and not a whole group. Plus while you might have to deal with trolls on Facebook and Twitter but SnapChat does not encourage trolling.

    It seems like SnapChat is waiting for a buyer which purchases them with a ridiculous amount of money but still gives them autonomy of the app policy.
  • Kaustubh Katdare
    Kaustubh Katdare
    @#-Link-Snipped-# - That's an interesting observation! The whole idea of auto deleting photo is not very promising. People can quickly capture screenshot and save the photos on their phones.

    Strange world we're in!
  • Satya Swaroop Dash
    Satya Swaroop Dash
    Kaustubh Katdare
    (I'm guessing Google or Microsoft will pick them up).
    It seems your guess was correct, Google was vying for Snapchat. Rumours within the business corridors suggest that Google was interested in picking up the company for a whopping sum of four billion US dollars. It would have left SnapChat as a standalone app just as Facebook had done after acquiring image sharing app “Instagram”. SnapChat founder and CEO Evan Spiegel is keeping the company for himself as he hopes that in the next funding round he could garner millions of dollars for the company and try to raise the market value of the company even more.

    Personal opinion: Spiegel should be able to predict the Demand Curve for SnapChat because if he sells the company too early or too late he might lose billions. Plus I think Google could have been the perfect buyer as it might have to expertise to get round the 'snapshot' issue of the app.

    Source: Google reportedly tried to outbid Facebook for Snapchat with $4 billion offer - The Verge
  • Saandeep Sreerambatla
    Saandeep Sreerambatla
    Why is someone buying this app? what is the purpose of this? I think the hype it is creating is useless and i am really not interested in using these kinds of tools.

    Why do you want to send awkward photos to friends? and to achieve what?

    I think we are heading into a world where nothing is secure.
  • midtra52
    Companies like SnapChat, Twitter, Linkedin, etc. are only popular as long as they're free. They're only free as long as the owners are losing money providing the service. Even facebook is eventually going to go broke. The valuations on these companies are insane and do not reflect the fundamentals (which is some case show the companies are worthless). If we even take Facebook which is managing to earn a profit, it's P/E is still nearly 100! This is even while facebook is losing it's human user base. Twitter has never earned a profit, Linkedin is temporarily earning a profit while some larger recruiting firms try out their system even though none have seen a positive return on the investment so far. Linkedin has a P/E of 227! These are the type of valuations we'd see during the dotcom bubble when people were investing billions in doorknobs.com and other ridiculous companies.

    The problem with these services like facebook, instagram, and linkedin, is that anyone can copy it, and hundreds have, you just most likely haven't seen it because they didn't get that critical mass of users first. But once the fad fades, or they start to charge a fee, or they clutter the site with ads, everyone flocks to one of their competitors that's willing to do it for free hoping they can also sucker a large number of investors to foolishly buy their product more based on name recognition and hype rather than financial viability. Eventually investors are going to wise up to this. If google buys SnapChat they'll lose billions doing so and their investors are not going to be happy about it. Right now the hype is making people delirious. But that's $4 billion that google could use to pay a dividend, but it will use to buy a company that will it then try to monetize and find that the users flock to the next service doing the exact same thing.
  • Kaustubh Katdare
    Kaustubh Katdare
    Welcome to CE, @#-Link-Snipped-#. I think most, if not all, the web portals that offer their products/services free of cost to the users have to rely on advertisements to keep the cash flowing. I believe none of these companies have found out a way to keep going without ads. I think most of the companies are following Google; which continues to make billions through online advertising revenues.

    We all know that all the social networking hype that Facebook created will fade and we'll see it with our own eyes in the next 2-4 years. Teenagers are already leaving Facebook and spending time on YouTube and other social websites. So these 'waves' will continue to be there for years to come.

    The valuation of these companies is phenomenal. I was surprised when Facebook decided to buy Instagram for a billion bucks. I mean, a billion for photo filters? Upon some thinking - I realised that photos are important for Facebook to keep people engaged and they're willing to lose any insane amounts of cash to do that. The same is happening with SnapChat and the clones of WhatsApp. These services have the young users which would be the consumers (ad clickers?) of tomorrow. SnapChat may know that they will have to accept a buyout offer today or tomorrow or shut the shop. They can't keep pushing till it gets boring for the buyers.

    Still, $4 billion from Google is no way justified. I wonder how much of cash will be burnt on capturing the new teenage generation, which will continue to get renewed every year.

You are reading an archived discussion.

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