I remember when Draw Something first became popular a few years ago and everyone was going back and forth exchanging drawings with their friends. After 7 weeks in existence, it sold for $180 million. Draw Something is all but obsolete now. The new craze is the app known as Snapchat. You take a picture of yourself or something around you and send it to the friends of your choosing who have it too. The image disappears after a set number of seconds, 10 being the max. The concept seems simple enough, so why did Facebook offer 3 billion dollars for it? And how could Snapchat turn them down?
Evan Spiegel, the 23-year-old founder of Snapchat, turned down Facebook’s offer because he believes his company may be worth even more. Facebook bought Instagram for $1 billion, which most investors thought was crazy at the time. Hindsight being 20/20, it’s clear that Instagram should have held out longer for more money. Snapchat is growing even faster now than Instagram was back in the day. Facebook initially offered $1 billion for Snapchat and was rejected, only to later make an all-cash offer of $3 billion.
Snapchat still isn’t making any money from advertisers at the moment and it just seems odd that a company making zero dollars turns down three billion of them. With constant technological innovation, Snapchat could easily become the next Draw Something if another, “cooler” app comes along.
What do you think: Should Snapchat have taken the money while they had the chance or keep growing and negotiate for an even higher amount in the future?