Christopher's Business Blog

The popular messaging app that allows people to send pictures for a set number of seconds was recently offered a 3 billion dollar buyout from Facebook. However, the CEO Evan Speigel rejected the offer from Mark Zuckerburg and Facebook because he believes his company may even be worth more. Even a chinese firm has valued FB at around 4 billion. So how can a company that makes no revenue be worth so much money? Many investors are skeptical of companies such as snapchat because they have short life spans and they have no income to make money from. Twitter faced many of the same issues, however they were able to integrate advertisements to create revenue. Something that may not be as simple for Snapchat.

Snapchat faces many problems but gaining new users has not been one. Snapchat sees as many photo uploads as FB and more than instagram and flickr together. The fact is Snapchat’s user base is extremely big and shows no signs of slowing down, which may account for one of the reasons why it is valued at so much despite only being started a little over year ago. It will be interesting to see what Snapchat plans on doing now that it has rejected such a large offer from Facebook. Will the company be able to grow and expand even more or will it slowly die out and depreciate? 

Sources:

http://www.businessinsider.com/snapchats-valuation-if-for-real-2013-11