In recent news Snapchat, an overwhelmingly popular mobile app messaging service rejected Facebook’s $3 billion dollar buy-out. This action indefinitely helped the company attract attention and led many investors to question the true value of the company as well as evaluating its potential growth.
In our previous lecture, we discussed how entrepreneurs develop successful start up companies and certain risks/obstacles that they had to overcome in order to get the result they wanted. Moreover, this article displays relevance to that topic since Snapchat, a relatively new start up company is worth more than $3 billion dollars in just 2 years. How is it possible that mobile app messaging companies like Snapchat, Twitter and Pinterest that technically make no revenue be worth millions of dollars? I am convinced that the sole reason behind their success is because that the companies are built around an unique product that attracts a tremendous customer base. The value of these companies are determined through their users whether its the amount of messages sent per second or the amount of users active daily. With proper execution, these types of start ups can easily bypass the barriers of entry and threaten existing companies like Facebook. Conclusively, if companies like Facebook want to stop their active customer base from declining they have to think of an immediate solution and an easy solution would be to buyout the competitor. However, this solution gives the start up companies a pretty good approximation of the threat level they impose on competitors as well as determining their growth potential in the upcoming years.
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