The 23-year-old Snapchat CEO Evan Spiegel recently rejected a $3 billion buyout offer from Facebook for his two-year-old company. For some people, billions sounds great but what was on his mind that he managed to resist a tempting offer? Turns out, the smart guy believes he could make more than that if he holds on a little longer.
Snapchat is a photo-messaging app developed by the Stanford University students which allows users to take photos, record videos, add text and drawings, and send them to a list of recipients. Recipients have up to 10 seconds to view the "Snaps" before the server auto-deletes it. It was started by Spiegel along with Bobby Murphy as a school project. The company is not making revenue but Spiegel said in October 2012 that the Snapchat team was unwilling to be acquired.
However, this year, potential buyers are throwing different offers and according to sources of the Wall Street Journal, Facebook offered $3 billion worth of cash to acquire the company. Unfortunately, that wasn't enough to make the Snapchat CEO change his mind of keeping the company.
Sources said that he plans to hold on to the company until next year. His decision revolves around his belief that his app could attract more members and has no signs of it declining. The level of activity is considered "high" as the app is reportedly producing 350 million snaps per day as of September this year. Thus, there is more chance to receive a bigger offer.
A Snapchat spokesperson declined to comment.
Snapchat's unique appeal of having an auto-delete message system is attractive to both users and buyers which investors are definitely willing to pay for more. Privacy indeed is expensive.
Facebook's interest on Snapchat is undeniably targeting its users. The photo-messaging app demographics is users between 13 and 23 years old. In a recent report, the social networking giant admitted that it is slowly losing grip of its teen users who choose to move on to other apps like Twitter, Instagram, and Snapchat. It recently acquired Instagram and since Twitter is unlikely to be bought, it's moving on to another competitor Snapchat.
And another news from The Verge said that Google also tried to buy Snapchat for $4 billion but got rejected as well.
Looks like Spiegel's strategy is working. The more you make it difficult, the higher the value becomes.
