Matthew Yglesias comments on the Snapchat bid ($3b, from Facebook, that Snapchat is turning down):
I think one should almost always root against the acquisition exit. It’s boring. It’s lame. The bet when you turn down $3 billion is that there’s some chance that in the future your company will be worth $30 billion or $300 billion and you want to reach for those stars and dare to dream.
Which is right on the money. But Snapchat isn’t turning down the Facebook offer on the basis of “we’re going to develop a revenue stream and go public.” It’s turning down the Facebook offer on the basis of, “In another six months, we’ll have more teens and you’ll offer us more money.”
Here’s the relevant paragraph from the Wall Street Journal article on the subject:
Evan Spiegel, Snapchat’s 23-year-old co-founder and CEO, will not likely consider an acquisition or an investment at least until early next year, the people briefed on the matter said. They said Spiegel is hoping Snapchat’s numbers – of users and messages – will grow enough by then to justify an even larger valuation, the people said.
Which, to Yglesias’ point, is the boring way out. But it’s also the correct way for Snapchat (assuming that the service doesn’t crash and burn). Their demonstrated expertise is in getting traffic from a desirable demographic. Monetizing that traffic is nothing they’ve tried to do, and is probably a tricky challenge. As long as Facebook and the other courters of Snapchat will come back with higher offers if Snapchat’s traffic increases, and they’re the people with proven expertise in monetizing traffic.
PS: While I’m linking that WSJ article, it includes this profoundly stupid paragraph:
Facebook had earlier offered to buy Snapchat for more than $1 billion, the people briefed on the matter said. In recent weeks, Facebook representatives contacted Snapchat again to discuss an all-cash offer that would have valued Snapchat at $3 billion or more. At that price, it would be Facebook’s largest acquisition, more than double its nearly $1 billion deal for photo-sharing social network Instagram in 2012.
All emphasis added. Two points here:
- Do people really need to be told what 3/1 is? I understand that if you’re comparing $37 million to $72 million, it may be helpful to add in “nearly double” or whatever. But I feel like we can compare 3/1.
- But if you’re going to help the people who don’t understand that three is triple one, then perhaps “more than double,” while strictly accurate, is not the most helpful phrase you could use.