Last week I wrote about why it made sense for Facebook to make a bid for SnapChat and overwhelmingly many wanted to see a counterpoint to that piece on why it did or didn’t make sense for them to turn it down. Well here it is – after an initial wtf moment on why these kids turned it down – it began to make more sense.
Developed by a group of Stanford University students, Snapchat is a mobile photo messaging app which allows users to record, send, receive, and write and draw on photos and videos. Known as “Snaps,” these messages all self-destruct one to ten seconds after reading. Since launching two years ago, the application has exploded in popularity, with over 350 million Snaps sent each day. It has, in the process, attracted approximately $75 million in venture capital funding.
SnapChat’s success has been such that it’s attracted the attention of none other than Facebook, which earlier this month approached the company with a buyout offer.
SnapChat is Not Ready to Relinquish Control
Unfortunately for Facebook, CEO Evan Spiegel isn’t interested in selling. According to the Wall Street Journal, he turned down a $3 billion acquisition offer from the social network. It wasn’t just Facebook, either: he also rejected a $4 billion offer from Google and a $3 billion offer from Tencent. Reportedly, the 23-year-old executive is planning to wait until next year at the earliest, in the hopes that SnapChat’s numbers grow enough by then to justify a higher valuation.
Some have called this a foolish move. SnapChat is currently still in its pre-revenue stages, and no one’s entirely certain how Spiegel is to monetize the application. Worse, though there are hundreds of millions of Snaps sent every day, the application’s user-base is still too small to support any financial gain more significant than the $3 billion payout that’s already been placed on the table.
SnapChat Following in the Footsteps of Facebook
SnapChat’s rejection of Facebook somewhat ironically echoes Facebook’s own 2006 rejection of both Yahoo! and Microsoft, when CEO Mark Zuckerberg went against his entire board of directors and turned down two separate buyout offers, the second of which was over $1 billion. There were doubtless a few dissenters who called Zuckerberg foolish then, just as some say Spiegel should have taken the money now.
Facebook is today the largest social network in the world, valued at over $118 billion. Zuckerberg and his executives have enough money in the bank that neither they nor their descendants will ever have to work again. Had he caved to the buyout, he likely would never have reached this point. Although SnapChat isn’t currently monetized, that doesn’t mean it never will be. The start-up is very much still in its nascent stages, with a staggering growth rate that shows no signs of slowing.
What the Future Holds for SnapChat
There’s also no question that Spiegel and his co-founder Bobby Murphy have big ideas in mind for Snapchat. Were they to sell, creative control over the application – and thus their ability to implement new ideas –would be in the hands of the buyer. They’d more than likely be unable to grow the company as they desired.
Last, but certainly not least, selling one’s organization isn’t the path to true success – for that, one needs to be willing to take risks. Spiegel and Murphy are willing: they recognize that what they have in SnapChat is a potential legacy, a chance to etch their names into history (not to mention the chance to make considerably more than $3 billion). What possible reason could they have for letting that chance at greatness pass into the hands of men and women who’ve already achieved it?
