Yesterday, the Wall Street Journal reported that photo-sharing app Snapchat turned down a $3 billion cash offer from Facebook to buy the company.
The news inspired reactions at both ends of the spectrum, with some lauding Snapchat’s CEO Evan Spiegel for being “gutsy,” while others called it “mind-blowingly reckless hubris“
To be clear, you have to be crazy to reject $3 billion, but not necessarily mistaken. 23-year-old Spiegel believes Snapchat has far greater value, and with its tremendous growth (especially among teens) it can hold out for higher. Facebook is going to have to pay a lot more to get a spot at the cool kids table.
Writing in Fortune, Dan Primack says Spiegel’s actions have some precedent in the industry.
Groupon, for example, famously shunned a $6 billion offer from Google. And, as we recently learned from Nick Bilton, it seems that everyone from Zuckerberg to Al Gore has tried to purchase Twitter over the years.
And Ben Parr, writing on his blog says Spiegel might even want to join the ranks of great entrepreneurs who retain ownership and build lasting companies.
How do you become the next Jack Dorsey, Mark Zuckerberg or Steve Jobs? A: You take your company all the way to IPO.Changing the world is certainly on the minds of the founders of Snapchat. So is legacy. While you can certainly change the world as part of a larger company, it’s easier to fulfill your vision when you’re CEO. These thoughts must certainly slide through the thoughts of the founders. They’re only human.
Can you really compare Evan Spiegel to Steve Jobs? That’s a lot of grandiosity for a product that essentially got its start as a sexting tool. Yes, Snapchat is hugely popular among teens and growing fast. But is that really valuable? Teens are notoriously fickle in what they like. Today’s hot app could be tomorrow’s MySpace. And despite the stampede to capture younger audiences, they’re not exactly a great demographic to advertise to, with their lack of disposable income and general aversion to all things commercial.
For a company that has no revenues and made its first move to court brands and marketers only last month (with “Snapchat Stories”) a lot of people think the real insanity is Snapchat’s $4 billion valuation. To put that in perspective, it means Snapchat has a higher valuation than Pinterest, Square, Airbnb, and Box. The last three companies have actual revenue streams and provide a product, or a service for actual money, which should be the measure of a company’s value. But apparently those requirements are trivial in Silicon Valley.
Evan Spiegel might think Snapchat merits more than $3 billion, whether he sells the company now or next year, he’ll probably still make enough money to never work again in his life. But is there a chance that this is the most valuable Snapchat will ever be? Definitely.