Facebook’s Clever, but Rejected, Proposal

The hot news of Snapchat declining Facebook’s acquisition offer of $3 billion has been circulating. Was it a smart or foolish decision? It reminds many of Facebook’s buy out of Instagram last year. Many say that it was a poor decision made by Instagram’s founders since the app is probably worth around $5 billion today and still has room to grow.

Similarly, Snapchat is one of the most popular apps today and although Yan Rong’s blog notes that people believe Facebook is losing customers to Snapchat, I do not believe that they are parallel. Snapchat is completely mobile, based on sharing short, moments with friends that cannot be saved or revisited. Facebook offers more; you can share different sides of yourself, message people you may be too shy to talk in person with, and catch up with friends. It offers a different value to customers, so contrary to Yan Rong’s comment, it cannot be considered a reason for Facebook’s decreasing shares.

Therefore, while Facebook may be reaching out to popular apps to expand its revenue stream, it is not necessarily an act of desperation, and Snapchat may not be foolish, as the acquisition of Instagram proves.