Facebook wants to buy SnapChat for 3 Billion, how do they justify the evaluation?
Why did Facebook want to buy SnapChat in the first place? First of all, it feels that it needs more engagement with declining teenage user. As new social media platform and apps come out, many teenagers and kids are losing interest in the current platforms. “The kids who are losing their passion for Facebook are pretty much exactly the same ones who are flocking to Snapchat by the millions.”Secondly, it is really difficult for Facebook to continue to grow by having its current business model, it simply have no more ways/rooms for them to do advertisement to their users; “they’ve hit the saturation point.” With the purchase of SnapChat, they will have a new media to do their business.
Facebook bought Instagram last year, which is a photo sharing app developed two years before SnapChat, but currently SnapChat users already sharing 7 times as many photos per day than Instagram.
The challenge for Facebook if they ever purchase SnapChat is to figure out a way to do advertisement.
The Reason that SnapChat rejects Facebook’s bidding is that they believe they are worth more to future buyers, though IPO they may be able to gain raise more money. The problem with SnapChat is that currently, their revenue is still purely notional. I feel that they made a wrong decision by not selling to Facebook, because Facebook has a great deal of experience in advertisement, and they can quickly change SnapChat’s business model to generate revenue. Once SnapChat misses this opportunity, they might not able to raise so much money once again, because their users might get bored with the app, and switch to new mediums.