Snapchat, a little company with only 20 employees, just rejected a 3 billion buyout from Facebook. What surprise people is that Facebook quoted such a high price offer to a company without any revenue right now. Its users compared to the 12 billion Facebook users is negligible. Many people are asking, “Why on earth would Facebook offer such a high price buyout to a small company?”

Jeff Bercovici posted a blog on why he thinks Facebook tried to buy snapchat for 3 billion cash. On one hand, the kids who are losing their passion for Facebook are pretty much exactly the same ones who are flocking to Snapchat by the millions. One purpose of buying snapchat is to win back the teenagers. On the other hand, snapchat’s revenues are purely notional so were Instagram’s when Facebook bought it last year. Buying snapchat would be a different form of insurance- a somewhat more expensive one.

In addition to agree with Jeff’s point of view, I also think there’re some other reasons why Facebook is doing that. Mark Zuckerberg, actually had a long time crush towards snapchat. In fact, he had even imitated a similar app, Poke. But ended in failure ultimately. This proves how Zuckerberg addicted in snapchat and its high value proposition.  Photo is consider the fuel of social networks. Snapchat handles as many photos as Facebook does every day. As blogger Benedict Evans pointed out in an analysis of it, even though Facebook uploaded 55 million extra photos each day via Instagram, snapchat claimed about 350 million photos each day as of September, the same speed as Facebook does.  Moreover, buying out snapchat helps Facebook monopolize in the market of  phone pictures.

Although many people now think snapchat has a higher value proposition than 3 billion dollars, it is interesting and true what Nikita said in her blog about this. Turning down Facebook’s offer is definitely a risky decision. What happen in the future is unpredictable. the market is highly competitive, other apps more creative and better than snapchat could arise in the future and catch people’s eyes, which could be a threat. Accepting Facebook’s offer would be a safer choice for the company’s future.

Sources:

http://www.theguardian.com/technology/2013/nov/13/snapchat-facebook-buyout-offer-rejected

http://www.forbes.com/sites/jeffbercovici/2013/11/13/facebook-wouldve-bought-snapchat-for-3-billion-in-cash-heres-why/

Why Would You Turn Down a $3 Billion Offer?!