Snapchat, a popular video- and photo-sharing service which has raised its valuation from $800 million to $3 to $4 billion, turned down a $1 billion offer from Facebook.
The news came after Snapchat announced it's looking to raise $200 million in a second round of funding, according to the Wall Street Journal. Snapchat is a mobile-messaging service that specializes in snaps, or photos with messages, that disappear within 10 seconds. However, despite the 350 million messages shared per day, the app doesn't really make any money right now.
Still, despite the lack of revenue, its popularity with teens and young adults are making advertisers and marketers extremely interested in the service. Not surprisingly, Facebook also took an interest. Unnamed sources told the WSJ that Facebook chief and founder Mark Zuckerberg approached the startup with a $1 billion offer but was rebuffed by its CEO and founder Evan Spiegel.
Neither Facebook nor Spiegel commented on the report.
Is Snapchat worth $3.5 billion? We don't think so, especially when it all the statistics we have on the startup come from the startup itself which cagily shies away from naming how many users it has. (While 350 million "snaps" sounds impressive, think of how many tweets you make on Twitter per day. Now imagine how many tweets you would create if you didn't have a full-time job. We come up with a generous 25, which would mean that Snapchat maybe has 14 million users.)
Add to the equation that Snapchat has no revenue or ad strategy in place, and that there are several similar apps in existence, notably Whatsapp
and WeChat. So is Snapchat unique enough to be worth more than other apps? It likely isn't.
Zuckerberg's offer to Snapchat, the same one made to Instagram
a year ago, was a solid one. We think its rejection of Facebook's offer will likely be regretted in a year's time.
Published at 10:16 AM PDT on Oct 28, 2013