Why did Facebook offer $3 billion for Snapchat, a company with no revenue?
The answer is simple. “Facebook is no stranger to snapping up a threatening competitor, as it did with Instagram last spring.” Although Facebook holds a very strong position in the market for social media on computers, however the mobile social media market is growing and changing at a rapid pace. Apps such as Snapchat, WhatsApp, Kakao, etc. are beating out Facebook in those areas. In response, Facebook has tried to either buy out or create apps with similar purposes in order to beat out the competition unsuccessfully. While these apps are no serious threat to Facebook, there is a chance that social media may shift towards mobile phones.
The actions of Facebook is expected of any monopoly in a market. They use the market power they have to ensure their position on top. So while it may seem ridiculous to buy Snapchat for $3 billion, it is understandable that a company would attempt to get rid of competition, even if it’ll cost them $3 billion.
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