When the news broke that Snapchat had received, and rebuffed, a $3 billion buyout offer from Facebook, many commentators were puzzled for two reasons. Firstly, why would Facebook offer billions of dollars for a startup with zero revenue and no obvious monetization strategy? And secondly, why wouldn't Snapchat's founders take the money and run?
While Snapchat does enjoy impressive user engagement (the service claims to process 350 million photos a day, as much as Facebook itself) and is especially popular among the younger demographic (a target group that has recently fallen out of love with Facebook), the service has yet to earn a single dollar. Some even go as far as calling Snapchat "intrinsically worthless" for "throwing away its own data in the golden age of data hoarding". Facebook is probably after Snapchat for its user base rather than its data and because it anticipates that the service might continue to grow and lure away users from its own services.
So why did Snapchat decline? First of all, Snapchat recently received funding that values the company above $3 billion, and second of all, Snapchat's founders may fear that selling to Facebook might well ruin the service they laboriously built. After all, many of Snapchat's teen users probably use Snapchat because it's not Facebook, because they don't have to fear encountering their parents and because they can be relatively sure their possibly compromising snapshots do not end up in the wrong hands.
Snapchat Could Become the Biggest Tech Exit in a Decade
Description
When Snapchat recently refused Facebook's $3 billion buyout offer, it also passed on the chance to become the biggest exit of an internet startup in the past decade. That crown belongs to Skype which was acquired by eBay for $2.56 billion in 2005.
