Snapchat, How Quickly You Have Grown

Description:  While some might have been shocked this week by the multi-billion dollar offers the start-up Snapchat turned down, I found something else entirely perplexing about the valuation of this little company: just how quickly it grew.

Source: NYTimes.com

Date: Nov 15, 2013

Snapchat-articleLarge

The report said that teenagers once called Facebook the best social site on the Internet. Now they’re abandoning the service and flocking to Instagram and Twitter. Other reports have noted that in 2006, Pew Research found that 85 percent of teenagers online had a MySpace account. By 2013, only 7 percent maintained an account there.

Teenagers may be fickle, but big Internet companies still need to court them.

During Facebook’s latest earnings call, the company’s stock began dropping rapidly, losing almost 3 percent of its value, after Facebook’s chief financial officer, David Ebersman, said the number of daily users who are young teenagers had been slipping.

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Questions for discussion:

1. Why did Facebook offer $3 billion to purchase Snapchat?  Is that a fair price?  Why or Why not?

2.  Should Snapchat sell, why and at what price?

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60 thoughts on “Snapchat, How Quickly You Have Grown

  1. Ruzaan du Plooy

    1. Why did Facebook offer $3 billion to purchase Snapchat? Is that a fair price? Why or Why not?

    I feel like this is a fair price, considering how successful Facebook is and how snapchat has quickly become a very marketable application. Unfortunately, I don’t think that buying snapchat is a very good investment. To back this up I would like to bring forth the topic of the black berry application that recently became accessible to android and iPhone users. This was an application that took these two markets by storm and was very successful…in the short term. Users soon realized that there wasn’t that big of an incentive to use blackberry messenger, as compare to say, the iPhone IOS texting. Same applications are applicable, you are able to update statuses, and see when the person you are conversing with has seen your message, or if they are busy replying. Slowly but surely users stopped using this application, and it is in my humble opinion that the same thing will happen to SnapChat. I feel like this is a quick fad, that will pass within a few months, when something more improved and exciting hit the market. This is an ever changing world, and if Facebook wants to shell out 3 billion dollars for an application be my guest. In business you can’t win them all.

    2. Should Snapchat sell, why and at what price?

    From a business standpoint, I think Snapchat should definitely sell. Especially when numbers such as 3 billion is brought to the table. I know the creators of this application is surely optimistic about the growth and development of SnapChat, however as I mentioned above, it is not practical to assume that this application will outdo every other one of the market. There will always be bigger and better, and while this is the application to have at the moment, I would use this to your advantage, before this become a “has-been” application. Although there is a small chance that this application will thrive for many years to come, just like facebook has. But…is 3 billion dollars really something you want to gamble with? I think not.

    Reply
  2. Scott Slomp

    1. Why did Facebook offer $3 billion to purchase Snapchat? Is that a fair price? Why or Why not?
    Facebook offered to purchase Snapchat for $3 billion because they realized how big this market was and how quickly it took off. Most teenagers want the new thing, whether it is some sort of technology, new clothes whatever it is. So when a few people started to use Snapchat, all of their friends wanted it to because most teenagers want what is new and hip. Facebooks numbers have been declining and they saw an opportunity with Snapchat that would boost their social media outlet to what it used to be or even higher. But once a new app comes along, Snapchat could fade out and Facebook could be right back at where they started.

    1. Why did Facebook offer $3 billion to purchase Snapchat? Is that a fair price? Why or Why not?
    I think that Snapchat should sell but i do not know for what price. If i were the creator of Snapchat and Facebook offered me $3 billion for it, i would sell in a heart beat. But I do not know what has all gone into this app and how much money they have spent on it to create it. If the creators have some sort of attachment to it or they feel that it will keep going up then they should keep it until they reach the peak nuber is reached.

    Reply
  3. Travis Cote

    Facebook offered to buy snapchap because snap chat is taking over a large demographic that facebook knows is a huge part of what makes facebook so succesful. With more and more teenagers dropping facebook and using social networking sites like snapchat companies might start looking towards snapchat to recruit from or advertise too. I believe that the 3 billion dollars, although a significant price, is not enough for such a young and booming company like snapchat. Facebook is looking to keep itself at the top in social networking sites and they are doing this now by buying the competition like snapchat, or instagram (which they already have purchased).
    Snapchat should sell eventually but I think that they should still hold off for a little while longer. that is a risk that snapchat obviously seems to be taking though, with how “fickle” teenagers are snapchat might want to sell before they just become dust in the wind.

    Reply
  4. Nic Hutchison

    Why did Facebook offer 3 billion for the rights to Snapchat?
    It is strange for me on why Facebook offered Snapchat an immaculate amount of 3 billion dollars for the Snapchat app. There is obvioulsy a reason on why they did this. One of them could be that Facebook is losing their market share and them knowing that Snapchat is being used by their target market, makes it a very usefull tool for Facebook to regain that lost market. They simply want to be the best interconnected Social Network on the market and on the Internet. It seems the Facebook fad is starting to lose its value, and they will need to learn new ways of beating their competitors.
    Should Snapchat Sell?
    3 Billion is a huge amount of money. Would be pretty ignorant of those young creators to turn down that amount of money. Especially having the chance that Snapchat will lose its interest just like many other Apps and Social Networks. They should sell while they have this amount of attention from Facebook. Unless they definitely know that they will be expanding and creating a better new Snapchat app.

    Reply
  5. Heather Mack

    1. Why did Facebook offer $3 billion to purchase Snapchat? Is that a fair price? Why or Why not?
    I’m not entirely sure why Facebook offered $3 billion to buyout Snapchat, though I’m sure it has a lot to do with how quickly Snapchat has grown in the last year. Success of that level is not going to go unnoticed by major social networking sites like Facebook. I imagine Facebook views Snapchat as an opportunity to keep socially relevant. The article mentions that Facebook’s value has depreciated by almost 3% and Snapchat’s popularity may have something to do with this decline. I do not think that $3 billion was a fair offer price, however, given the article states that Snapchat is worth at least $4 billion. Snapchat is not in a decline phase of their existence and therefore should not be sold for 75% of their estimated value.

    2. Should Snapchat sell, why and at what price?
    I am unsure as to whether Snapchat should sell or not. If the creators of Snapchat feel that they have the ability to keep Snapchat socially relevant within the teenage demographic, then they should continue to grow and develop the company. However, Snapchat could be a social media fad and could fizzle out just as quickly as it began. As the article said, teenagers are fickle, and they drive the social networking market. I would be leery to gamble on a demographic so unpredictable. Given my personal use with Snaphhat I do not see it being a sustainable social network at the stage it is currently. My use lasted a few months and quickly fizzled out after receiving the same “selfie” shots from friends. I imagine that they would have to add features to the app to keep it socially relevant. So depending on the creators long-term objectives, I am unsure as to whether it is in the company’s best interest to sell or not.

    Reply
  6. Scott Jago

    1. Why did Facebook offer $3 billion to purchase Snapchat? Is that a fair
    price? Why or Why not?
    To be honest, I’m not exactly sure why Facebook offered to aquire
    Snapchat. Is that a fair price? Very difficult to say as “fair” is kind of
    open ended and subjective. Yes snapchat has become immensly popular within
    the social media market, but I fail to see how it generates revenue.
    Becuase of this notion I’m not sure how facebook arrived at that
    valuation. As volatile as social media is (ie where is myspace now) I find
    this offer by facebook to be inherently risky. With increased competition in the social media segment (Twitter, linkedin, instagram) acquiring snapchat could revitalize facebook should they be able to effectively integrate it into facebook somehow. Because of the large offer I’m led to believe that they feel they could monetize it somehow it the future, but as of now that remains to be seen,
    2. Should Snapchat sell, why and at what price?
    I think snapchat should sell. Why? I think is a case of striking while I
    iron is hot. Unless there is future plans of monetizing the app.

    Reply
  7. Shelby

    Facebook offered Snapchat 3 billion dollars because it wants to remain the coolest social media site. With the growing popularity of Snapchat, Twitter and Instagram Facebook needed something to give it a new edge and gain back popularity. I don’t think 3 billion dollars was a reasonable price because as stated in the article, the company is worth more than 4 billion. The 4 billion doesn’t include the intangibles and the benefit it would give Facebook. I think the offer needed to have been higher however I don’t think Snapchat should sell. The only reason Snapchat should sell is if they didn’t have the popularity and exposure to gain enough interest and popularity to make money. However, they can easily make enough money on their own and are known today as independent from other social media such as Facebook and Twitter. As mentioned in the article and known by everyone who participates in the technological world, teenagers are always looking for something new and cool. When Snapchat is independent they are that something new and cool. If they were to sell to Facebook, Snapchat would just be something new on Facebook and probably wouldn’t have the same effect as if it is independent. As long as Snapchat continues to find ways to gain exposure to further market segments or new segments then it will continue to do fine independently. In my opinion they will have to further the brand and offer some new option to stay in peoples favourites. As I mentioned before, teenagers are always jumping to the latest and coolest things so I believe that if Snapchat doesn’t expand it wont succeed in keeping its current users.

    Reply
    1. Chris Jones

      Facebook offered to buy snap chat for a simple reason and that reason is they want to be the biggest social media outlet. Face book is currently losing market share to other main competitors such as twitter and snapchat. One-way to gain back some of the market is to be the biggest and best. This includes having what is most popular with consumers today, that being snapchat as everyone with a smartphone is using this application. I believe the offer Facebook made to purchase Snapchat was more then fair. I believe Snapchat should have definitely taken this offer. Snapchat would be very hard to give a value to, as it has no revenue stream. 3 billion dollars just seems like a large amount of money for what I believe Snapchat is…… a waste of time and a trend that will die out in the next year. What’s so awesome about seeing a picture or video for 5-10 seconds that is then never viewable again?

      Like I said earlier Snapchat is one of the most popular apps consumers are using right now and they should have sold. The demand for there product is extremely high and the most profit I believe they can attain is if they sold now. Again like I said I believe snapchat is a waste of time and will die out within the next year. This combined with the fact that technology and new apps change and evolve so rapidly leads me to believe there will be something new and most likely better within the next few months. It is too hard to give a value to Snapchat. I believe Snapchat made a huge mistake.

      Reply

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