Facebook recently offered Snapchat $3 billion for its application but was turned down by entrepreneur and CEO, Evan Spiegel. Why? because leaks suggest it’s worth more. Snapchat is an application where users can send pictures to their friends for limited time frames with no digital footprint. Facebook is facing a drop in stock price and a decline in adolescent users.
For Facebook, this is a worthwhile investment because many teens are now using snapchat in replacement of facebook. $3Billion may seem daunting at first, especially with Snapchat’s current revenue at $0, but the costs outweigh the possible future profits because Snapchat is rapidly expanding with its users increasing at an exponential rate. Facebook’s offer to buy snapchat also shows its adaptability as a business to its industry and competition. Since Facebook senses a correlation between decline in teen users and an increase in Snapchat users, it has decided to buy Snapchat the way it bought Instagram in 2011. Snapchat has lots of growth opportunity with an increasing profit margin and that’s something Facebook wants to get dibs on.
http://www.huffingtonpost.com/2013/11/13/facebook-snapchat-3-billion_n_4268859.html