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Facebook Reportedly Offered Snapchat $3 Billion in Cash for Acquisition, Was Denied

Dr_Evil

According to the Wall Street Journal, a recent attempt by Facebook to acquire Snapchat with an all-cash offer of $3 billion has been turned down. Real quickly, we want to sum up what a $3 billion idea apparently looks like. Snapchat is an app that allows you to send images and videos to friends that are then deleted after a determined amount of time once they are opened by the receiver. The longest a photo can stay alive after being viewed is 10 seconds, so think of it as a ticking time bomb attached to sent pictures. 

It is used by younger folks for naughty things, and also for friends that just like to share funny pictures that have no real value. If they had any value, then they wouldn’t want it to disappear forever, right?. So, this is what $3 billion will buy you these days.

Snapchat uses no ads in the app and the service is completely free to use. It’s great for users, but once a company sees a potential in creating a profit from its users, then that’s when the big players come in.

According to sources close to the matter, Snapchat is being eyed by major investment groups and recently received an offer for a lead on an investment that would value the company at $4 billion. With a valuation like that, it’s pretty easy to see why a 23 year old CEO would say “no thanks” to Mr. Zuckerburg. Either way, this seems like a ridiculous amount of money for a time bomb photo sharing app.

Who is in charge of company valuations for apps these days, Dr. Evil?

Via: The Verge | WSJ

  • Higher_Ground

    Just one more example of the vast disparity of wealth in this country. There’s no way the app provides $3,000,000,000 in value. And that’s not to mention that Facebook would likely run it into the ground anyway. They would be better off giving $3B to charity.

  • stopper-by

    Best advertising ever – $3 Billion in sight, then 10 sec later – poof, it’s gone.

  • sk3litor

    Leave the briefcase under the bench and slowly walk away. Just imagine the alarm clock they would give him for opening a bank account with $3B cash. I wonder if he’ll go for the cash back rewards program.

  • TylerChappell

    So basically, FB wants ownership over everyone’s nude selfies, including minors. And they think it’s worth $3 billion.

  • Trent Callahan

    If I were Google, I’d make an offer so ridiculously huge, that they couldn’t reject it. Then, when I owned it, I’d discontinue it and kill the servers. I hate “Snapping.”

    • TylerChappell

      You must be one of the bitter children that doesn’t get nudies from his friends.
      /s I’m only joking.

      • Trent Callahan

        Bahaha, nice one.

  • Kevin B

    You can turn down $3 million, but not $3 billion.

    • Josh B

      I would sell out in a heart beat and not have to work another day in my life. I am not vain and need people to know my name for something I made I just don’t want to have to work.

  • Daistaar

    Blackberry should make an offer. Imagine the possibilities! A congressman could have a secure enterprise network for government and the ability to send a weiner shot that automatically gets deleted!!! WIN WIN!!! Return of the FapBerry!!!

  • drdrowsy

    remember when amazon was trying to buy groupon for some ungodly sum?

  • Trueblue711

    I read in the WSJ that until negotiations with Facebook began, they didn’t even have a business plan. Their valuation is unbelievable, and arguably as ridiculous as Instagram’s.

  • Craig P

    So Snapchat thinks they’re worth the price of Star Wars?

  • EvanTheGamer

    I’m thinking there’s a pretty big reason behind this $3 billion decline. Perhaps the Snapcat CEO is thinking, “Hmm…if the King of Facebook himself is interested in my small app, then maybe there’s others out there who may be equally if not more interested? Maybe $4 or 5 billion interested? Might as well keep my options open.”

    If that is the case though, kinda foolish if you ask me considering that no one else might even be more interested in an app such as Snapchat than FB anyways so they might be kicking themselves in the arse later on.

    Or they may just hate Facebook or hate money or both. Who knows the real reason though.

  • JHO5

    Does SnapChat hold intellectual property on doing this? Otherwise, what would stop say Google from implimenting this into core Android? At that point, you’d start to see rapid diminishment of SnapChat’s marketshare because frankly, its more convenient to use something that’s already built in to the OS.

    • QtDL

      And isn’t there another app that does this very thing with text messages?

  • grizzlyfoz

    Snapchat > 3 Instagrams

  • J Davis

    I would have taken and cashed that 3b dollar check in 10 seconds.

  • Carlton Crasher

    Snapchat + native screenshot = hehehehe

    • hoodieNation

      That’ll teach em!

    • baniels

      Except snapchat will then alert the original sender that you took a screenshot.

    • TylerChappell

      Or you can just download the Snapsave app and use that instead.

  • Radgatt

    It may actually not be about the money. Maybe they want an app that doesn’t have all of the unnecessary ads associated with it. Maybe they think they have a good enough app that they don’t need anyone from the outside with input. Ever since instagram was bought by Facebook it may loom the same but its definitely different. With the ads on that app going in full effect that experience is going to go down. I understand companies wanting to make money that’s why I say it may not be about money with the CEO of snapchat. But then again, I could be totally wrong and he could be waiting for the larger offer. Time will tell.

  • Johngi

    They are just waiting for the 5 billion dollar bid.

  • DanSan

    whats more shocking to me is facebook easily has over 3 billion in cash on hand at any given time with enough left to keep the vault stocked.

  • zachos

    This is a sign of Facebook’s desperation to maintain the younger user base… that’s why it is worth $3B to Facebook. But, for most investors, $3B is an absurd valuation for a company that MAKES NO MONEY. They should’ve taken the deal.

    • Jeremy Wray

      the whole key to business is make money. im sure the company makes it somewhere, just not through ads

      • Good_Ole_Pinocchio

        Think Twitter is turning a profit? These people get paid by investors, investors expect to get paid when the company figures out how to start turning a profit.

        Instagram wasn’t making any profit either

      • zachos

        Facebook would be buying Snapchat almost exclusively for the user base. Facebook would market that user base as a very valuable audience to potential advertisers. So, Facebook would be able to derive value from the transaction through increased advertising revenues (Facebook makes around 90% of their revenue through advertising). Snapchat may have SOME revenue, but I’m not sure where it would come from (the app is free, there is no advertising). On a net basis though, they are almost certainly losing money hand over fist.

        • Jeremy Wray

          Most likely on the back end somewhere. they prob sell anonymous info to google or someone. I mean the 17 people who work on the app are still gonna have bills and overhead to pay for (referring to before the 60m in investments, since post that bills would be paid.)

          • Shaun

            Twitter hasn’t turned a profit, but according to you Snapchat somehow has.
            You have no idea what you are talking about.

        • ZogZog

          Just because there is no ad doesn’t mean they don’t sell their userbase to advertisers already, demographics, city, devices, all sort of stuff, so they can be marketed more efficiently elsewhere.

        • michael arazan

          The biggest problem if FB bought it is, that FB copies every picture and video you post on their site, whether or not you delete it, they still have a full copy of your account. And I’d be willing to bet they would keep a copy of every pic and video that people send with snapchat as well if they had or might purchase it. Right after the purchase people would get a new user’s agreement and just automatically click ok w/o reading the fine print.

  • ajcarson

    Snapchat is going to reach it’s peak soon before devaluing to nothing, just like any other social networking service. Stupid move to not take the cash IMO. 3 Billion into investments could make a lot of people a LOT of money. Snapchat’s arrogant to think they can sustain their service beyond that.

    • Joseph Barrientos

      thats what they said about twitter years ago… and now?

      • ajcarson

        If this were only a 50 million dollar offer it would be a different circumstance, but I would find it difficult to have 3 billion dollars worth of confidence in today’s teenage market.

        • Joseph Barrientos

          i totally see your point, really, just i dont think it’ll die as soon as everyone else thinks. at first it was a way to “sext” i use it for silly videos, faces, things that i want seen but not kept i suppose and i like the idea of sharing “my story”

          • picaso86

            Well, now teenagers have Vine, Instagram and other sources to chat. I understand these social medias doesn’t serve the same purpose as Snapchat but we can all agree it will devalue quick in a few years.

    • Scott

      You really think the 23 year old CEO made the final decision on whether or not sell to $3B? I highly doubt it. The Snapchat VCs made the call not to sell. If anybody’s greedy here, the VCs funding the service the kid-CEO.

  • Dre Fay

    I think i heard they were holding off for a counteroffer by Linked In

  • IcerC

    Snapchat has the kids facebook is hemorrhaging.

  • droidify

    Wow. At 23 years old I would have took the money and probably been dead within 3 months

    • XxDEMONKILLAxX

      Hookers and cocaine?

    • Jeremy Wray

      dude prob already has more money then he knows what to do with so why not just keep raking in the profits. he likely doesn’t even do anything for the company anymore except cash paychecks.

      • Col_Angus

        What profits? They have no source of income.

        • Jeremy Wray

          Because investors gave the company 60 million dollars out of the kindness of their hearts…..

          • Col_Angus

            Investor capital isn’t profit.

  • QtDL

    So $3 billion isn’t enough money apparently? I think I could live quite comfortably on that amount.

    • Mike Hilal

      If you didnt squander it, so could your children…and their children

      • Jeremy Wray

        technically your next 10 generations could likely live pretty well off with that money. and it’s gonna be in a bank earning hundreds of thousands of dollars of interest too at the very least if it doesn’t get invested and make more.

        • Mike Hilal

          Far more than that in interest…even after cap gains taxes.

    • Joseph Barrientos

      well to be fair the CEO doesnt get ALL of it

      • QtDL

        I suppose you’re right. I’ll just take $1 billion and use the rest for the minions…I mean employees. I’m still working on my ridiculous app idea so I can sell it to Google….

  • n11

    Excellent, we don’t need anything else to start being owned by FB. Kudos to snapchat!

  • Nexus_FrEak

    They’re waiting for an offer from Google :)

    • poop

      “All the money on Earth…divided by 2. That is our final offer.”
      “No.”

      • michael arazan

        And a picture of Bea Auther Naked

  • Thorboy

    How can this company be worth $3 Billion? Do they even produce revenue?

    • Ray Gray

      Potential but if Instagram was purchased for 1bil snapchat def isn’t 3x the worth of instagram

      • Joseph Barrientos

        isnt its networth 4b?

    • Jeremy Wray

      They are a business and I’m sure there is some sort of overhead so unless dude is already rich and wanted to make an app out of the kindness of his heart the company makes money somewhere

    • aQuickBit

      It’s because of the userbase. We the people are the product, not Snapchat. They have a huge network of consumers that they could potentially sell to another company like Google, Facebook, etc that could use that userbase as a source of revenue through data mining and advertisements.

      • ZogZog

        I’m sure Snapchat is not privacy white knight and is already selling its data mining to some rival of the big F and they see far more profit to it in long term strategy than a one time 3b$

        • aQuickBit

          Oh I’m not saying they are. I was just referencing how they don’t have ads at all for this free service. Imagine if they sold it to Facebook or Google? Every time you load the app you have a banner ad at the top of the screen similar to the free version of Angry Birds or something like that. That’s all I was trying to say. If they do it without my knowledge and it doesn’t affect my experience with the user interface then I really don’t care.

  • steve0617

    Holding off on a big buy out offer certainly worked for Groupon.

    Oh wait….

    • inklenotrump

      groupons market cap is still north of Google’s $6BN offer..

      • steve0617

        True. But its stock price is a little more than half its IPO and by their own admission, doesn’t have a great outlook. My point was, take the money now and run given a sketchy long term business outlook for both companies.

        • inklenotrump

          oh I’m with you on taking the money and running. If I ever got close enough to that kind of $ in a tech startup that could be a fart in the wind, I’d be doing just that. That being said apparently all it takes is users.. regardless of ability to monetize the product.

          I don’t use Snapchat but I’d imagine seeing an ad for Tide (or whatever) right before a Snapchat may alienate the user base.

          I do like what they’ve tapped into though – the idea for kids these days is that the internet is permanent. (even snapchat can be through various avenues) but I think the bigger picture is kids especially don’t want their entire lives recorded from birth. I know I wouldn’t want my youthful mess ups to be as well documented as today’s kids have theirs. I think that idea is going to be a real $ maker – and maybe not just that demographic… now if only I had the resources and ideas.. :(

  • S2556

    Every single friend with a smartphone has this app installed. If only hangouts was the same way

    • Jeremy Wray

      not I said the user with a brain

  • Pierito

    That’s right you can’t buy us…AND YOU NEVER WILL!!!…..what was that?…..5 Billion now?!? uhhhhh