UPDATED 03:43 EDT / NOVEMBER 14 2013

NEWS

“No Thanks” – Snapchat snubbed Facebook’s $3B buyout offer

Did Facebook really offer $3 billion to buy the popular messaging service Snapchat? The Wall Street Journal says that it did, citing “unnamed people briefed on the matter” in its report.

The WSJ says that Facebook’s seemingly ludicrous offer reflects the growing interest around new online messaging services and other social media formats. But more than that, perhaps it also underscores the recurring speculation that younger people – particularly teenagers – are thumbing their noses up at Facebook in favor of such services, which, as in the case of Snapchat, often offer a much higher degree of privacy.

As you may remember, Facebook was more than happy to shell out $1 billion on the photo mutilating Instagram app last year. Instagram was of course, seen as a serious threat to Facebook precisely because its so popular with the younger set. Not surprisingly, many are speculating if Facebook’s offer for Snapchat – if it really did happen – is a sign that Facebook is growing worried about yet another potential rival.

There’s been plenty of buzz on Twitter since the report, with many expressing surprise at the insane size of Facebook’s offer, while others have questioned why on earth Snapchat’s founders Evan Spiegel, 23, and Bobby Murphy, 25, apparently turned it down.

Why does Facebook want Snapchat?

 

It’s not that Facebook is really quaking in its boots at the prospect of its one billion-plus users suddenly ditching the service – that’s not going to happen, certainly not overnight anyway. Rather, Facebook wants a part of Snapchat because a growing number of its users access their service via smartphones rather than PCs, and messaging is one of the core functions for all smartphone users. Facebook’s mobile advertising revenue share has been on the up, but it’s still not generating nearly as much cash as it would like, and only last month it admitted that fewer young teens were using its service on a daily basis.

Snapchat, and applications like it, represent a dynamic shift in social media, and it isn’t necessarily one that’s going to be defined by public or shared interactions. Services like Snapchat offer an antidote to the likes of Facebook, which captures life’s moments so they can be liked, shared and commented on. The appeal of Snapchat lies in the fact that nothing is permanent, its users don’t have to worry about unflattering or awkward comments and photos that keep on popping up unexpectedly.

It’s proving popular too. Just recently, Snapchat said that it was processing more than 350 million messages a day – a staggering rise from the 60 million or so messages it processed each day back in February. And it’s not just Snapchat, as other messaging services are seeing similar growth – the likes of WhatsApp, Line and WeChat, among others, have all added of millions users in the last year.

For its part, Facebook has tried and failed to get in on the act, introducing a similar product called Poke that failed abysmally. Then there’s Facebook’s standalone Messenger app, but that too has never really gained the momentum of, or been as cool as, some of its rivals.

Are they mad?

 

The real question isn’t so much why Facebook wants Snapchat, but why Snapchat would turn down such an enormous offer. They must be mental to turn it down, surely?

Perhaps… After all, Snapchat is yet to make a profit, and its not clear if its largely teenage user base would be willing to pay for premium services or tolerate ads popping up everywhere.

But then again, Snapchat’s leaders could have other ideas. There are signs that it might become one of the first social media companies in the US to derive a revenue that doesn’t come from advertising. Speaking at TechCrunch Disrupt last September, Spiegel told his audience that he sees Snapchat duplicating the success of overseas messaging apps like Line and WeChat, both of which have found ways to make money away from advertising. Line, which is based in Japan, is said to generate some $10 million a month from the sale of ‘stickers’ that users can send to their friends while chatting, while China’s WeChat offers paid subscriptions to brands like Nike and Starbucks.

This potential, along with its rapid growth, could be what has emboldened Snapchat’s leaders to rebuff Facebook’s offer – either they’re thinking that the company could be worth even more in future, or perhaps they have even greater ambitions and believe they can rise to the level of Facebook themselves. Complete insanity perhaps, but consider that Mark Zuckerberg once turned down offers of $1 billion from Yahoo, and later, $15 billion from Microsoft – and it didn’t work out too badly for him, did it?


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