Rejecting Billions, Snapchat Expects a Better Offer

http://www.nytimes.com/2013/11/14/technology/rejecting-billions-snapchat-expects-a-better-offer.html?hpw&rref=technology

by boh • 13 years ago

33 32 13 years ago

nytimes.com

antonius• 13 years ago

Anyone else not able to read the article? NYTimes prompts me to register beforehand.

needcaffeine• 13 years ago

Incognito mode, perhaps?

leggo2m• 13 years ago

The concluding line says it all:

“I’m facing a crisis in this industry, said Mr. Ma. “Young people, the things they like on the Internet, increasingly I don’t understand it. This is my biggest worry.”

increment_i2• 13 years ago

I'm on the verge of turning 30, so I'm not too old to remember being a teen, but I can also sense a mild but tangible generational gap between me and the teenagers of today. So while a 1 billion offer for a chat app seems outrageous to me now, I know that Teen-Me would be all over something like snapchat.

I don't know what that says about what kind of software I should be building, if it says anything at all.

mc32• 13 years ago

I think Groupon was said to have done something like this. Not sure that was a face-saving move or not (rumor was Googs didn't like what they saw in their books much). If it wasn't then they overplayed their hand and never got their six billn. Wonder if this will end up being similar.

nilkn2• 13 years ago

Snapchat is already a very rich company. The founders are probably indifferent to the wealth at this point.

I also think a lot of people (myself included) find it hard to comprehend how much money can be made selling stickers in messaging apps. It's mind-boggling, and Snapchat, processing 350+ million messages a day, is in a very strong position to leverage that eventually.

All that said, I'd accept a $3B cash offer in a heartbeat if I were in their shoes. I wouldn't be confident in Snapchat's long-term survival. It might double its user base in the next year and then swiftly die when the next fad comes along. I feel that timing will be critical here. If they wait too long, they could lose it all.

increment_i2• 13 years ago

Exactly. They can afford to be a little greedy, but shouldn't push their luck. Their success as of now is very much based on the vogue factor. Geocities sold for over 3.5 billion, on the verge of the dot-com collapse.

albeec13• 13 years ago

Would you care to elaborate on how they're a "very rich company"?

(Edit: I actually read the article after my post and saw the section about Benchmark Capital's $13 million investment. The rest of my comments still stand...)

Now if you meant they have built such a large following that a buyout is inevitable, and/or they stand to make a lot of money by introducing a business model into the equation, then I'd agree. However, that does not change the fact that the owners are incredibly greedy not to accept a $3 billion cash offer, especially considering the fact that there's no guarantee they can come up with a viable business model at all. Now that they've turned down an arguably hugely inflated offer, they may have made a huge mistake in the long run.

Let's not forget that Snapchat isn't exactly a difficult product to clone, and the only thing going for them right now is user numbers. If they introduce a poor money-making mechanism into it, users will not hesitate to flock to the "next big thing" instead of forking over cash or dealing with intrusive ads.

001sky• 13 years ago

that does not change the fact that the owners are incredibly greedy not to accept a $3 billion cash offer

Hard-nosed seems like a better term. In many cases indistinguishable by obserbation, but Greed is both pejorative and moralizing. Absent special knowledge of the principals state of mind, its use also seem presumptory.

chrislipa• 13 years ago

the owners are incredibly greedy not to accept a $3 billion cash offer

You can look at this another way -- Maybe greedy would be taking the life-changing amount of money here, and they're not because they actually like their jobs.

jdludlow2• 13 years ago

how much money can be made selling stickers in messaging apps

I'm not trying to be difficult; I really don't understand this statement. Are you talking about paper-and-adhesive stickers, like my kids use to plaster Strawberry Shortcake everywhere? What do those have to do with messaging apps?

nilkn2• 13 years ago

This is what I was referring to:

http://thenextweb.com/asia/2013/07/12/stickers/

Line is now supposedly making $10M/month just from these stickers.

kylelibra• 13 years ago

February 2013 - 60 Million Photos Per Day

November 2013 - 350 Million Photos Per Day

That's some serious growth. Seeing that much growth over a nine month period probably has a huge influence on why they think a better offer will come around.

guiambros• 13 years ago

Groupon-effect.

In 2010, Google offered to buy them for $6B. One year ago today, GRPN hit its lower point in history: its marketcap was less than a third of what Google offered originally. Andrew Mason was fired after soon after, after missing estimates, again.

The stock recovered considerably since then ($6.9B market cap today), but it's a reminder for young entrepreneurs that the market is ruthless with one-trick ponies.

Unless you have something on the table from Facebook, I fail to see what's their long term strategy.

raverbashing4• 13 years ago

Some time ago there was a "Startup FAQ" (can't remember the exact title) circulating. But it has this:

"Q: A company wants to buy us, what to do? A: Sell"

I don't think truer words were ever spoken.

Are they really taking themselves that seriously?

Dropbox could get away with it, they have a good source of revenue. Not something like Zynga.

Then you can use the 3B to either go on vacations or build something even cooler.

Edit: nmb found it: http://www.jamesaltucher.com/2013/08/the-ultimate-cheat-shee...

nmb• 13 years ago

Was trying to find that FAQ, I think it might have been this one: http://www.jamesaltucher.com/2013/08/the-ultimate-cheat-shee... (the last bullet of #25)

raverbashing4• 13 years ago

Exactly this one, thanks

wellboy3• 13 years ago

Why sell? After a valuation of $100M it's all just fun and games and a very unique experience that fewer than a 10 people/year or so can have in their lives.

You can't buy that with money.

raverbashing4• 13 years ago

The question is, can they get 3B (or more) in another way?

If Instagram's 1B was already excessive what's 3B for Snapchat?

You're mentioning valuation, but the 100M do not exist. Yes, things have the value they are bought/sold for but selling 10% of something ends up skewing those values.

Yes, it's a definitely cool experience. The you can pocket the 3B and go have another fun experience with another company (or even at the same, unless the company is absorbed/shutdown)

amac• 13 years ago

Why sell?

They need to be profitable one day.

npalli• 13 years ago

From this article — "one roadblock in the talks with Facebook was that Mr. Spiegel questioned whether he wanted to work for Mark Zuckerberg, Facebook’s young billionaire chief executive”

Excerpt From: Nick Bilton. “Hatching Twitter." — “Biz and Ev had driven down to Facebook’s campus a few days earlier to meet with Mark. Like most meetings involving the chief of Facebook, it had been almost unbearably uncomfortable”

Looks like founders don’t want to work for Zuckerberg. Any company looking to sell to Facebook would need a 50% Zuckerberg premium.

rtpg• 13 years ago

Could Zuckerberg be forced out of the leadership now that FB is public? sounds like a good reason to push him slightly aside, especially given how aqui-hire-y everyone is recently

cylinder2• 13 years ago

No. FB is hardly a public company, even though its shares can be traded on public exchanges. Zuckerberg owns about 28% of the company, but has ~57% of the votes. Shareholders other than Zuckerberg have no say on the Board.

Even FB itself listed Zuckerberg's voting power as a potential risk on its own S-1 filing. ”So long as the outstanding shares of our class B common stock represent a majority of the combined voting power of our common stock, Mr. Zuckerberg will be able to effectively control all matters submitted to our stockholders for a vote, as well as the overall management and direction of our company.”

bsaul• 13 years ago

Never read that mark zuckerberg had this reputation. What's the thing that makes him (presumably) uncomfortable to work with ?

diminoten• 13 years ago

What's cooler than a billion dollars? A trillion.

I'm in my mid 20s, and I already don't get Snapchat. When my friends use it, I almost feel like they're trying to stay attached to being young - like they're sending each other snaps simply because it's "what kids these days do". Isn't that the textbook definition of a fad?

I am not really sure who would offer Snapchat more than $3bn. Maybe Google will buy them out of fury, over all the data they're deleting (can't organize the world's information if it's getting deleted).

Also, there's no way they're actually deleting all of those snaps, right? That's sure to be a scandal at some point, when someone figures out how much of the data they're keeping. Maybe not the images themselves, but I'd love to build a network out of the "who sent snaps to who" data.

Rejecting Billions, Snapchat Expects a Better Offer

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