Recently, the company Snapchat has grown to immense popularity and it has been reported that it received offers from Facebook and Google for $3 billion and $4 billion respectively.

Snapchat as a company does not have advertising. Unlike Facebook, Twitter and even Instagram, its platform is very simple, with no place for advertisers to post material. This leads to the question, “Why would Google and Facebook offer so much for a company that isn’t making much money?”

My analysis of this question is simple. Snapchat is seen as an opportunity precisely because of its simplicity. One of its value propositions is that it creates a very simple and easy way of messaging friends that is not permanent. Youth are interested in it because unlike Facebook and Twitter where posted material can result in embarrassment, controversy and even bullying, Snapchat creates a fun, non-threatening way to communicate. Snapchat also has the added value proposition of not having advertising, eliminating the messages that constantly bombard other social media platforms.

Facebook and Google see this simplicity as an opportunity. They understand that preferences amongst social media users are always changing and that consumers always have the option to spurn one platform for another. Clearly Snapchat, through its product differentiation and simplicity has become a platform that people both now and in the future could prefer over giants like Facebook and Twitter. Perhaps that is why it has become the $3 billion happy ghost logo.

Here is a great article on this current topic: http://www.forbes.com/sites/davidwismer/2013/11/17/snapchat-how-to-make-3-billion-or-was-it-4-billion-disappear-and-other-quotes-of-the-week/