Owners of the popular photo messaging service Snapchat have reportedly refused an acquisition offer from Facebook that would have made them extremely rich.
According to Wall Street Journal, which cited sources close to the company, the social network offered around $3 billion to buy Snapchat – more than double the amount Yahoo paid for Tumblr earlier this year.
Several other companies want to either acquire or invest in the service – for example, China’s Tencent Holdings, the owner of WeChat, proposed to lead a funding round that would value Snapchat at $4 billion.
Snapchat, developed in 2011 by a group of Stanford University students, allows users to take photos and record videos that will be deleted several seconds after they have been viewed by the recipient.
Just a few months later, Facebook offered the founders $3 billion in cash – if successful, this would be the social network’s largest acquisition by a long stretch, almost three times the amount it paid for Instagram in 2012.
But according to the sources, 23-year-old CEO Evan Spiegel is trying to hold off on any strategic moves until early next year, in hopes that the value of the company will keep growing.
Apparently, Facebook had already approached Snapchat in the past, offering around $1 billion for the messaging service.
Snapchat has not issued a comment on the report.
One of the reasons for the rapid rise of Snapchat is ‘sexting’ – a practice of sending and receiving explicit images that often involve some degree of nudity, especially widespread among younger users of the service. However, developers insist that the functionality of the service has not been adapted to enable or encourage sexting.
Unprofitable but popular messaging and social services with strong mobile support have become a prime target for investment in the last 12 months. Last week’s Twitter IPO has valued the company at more than £11 billion, while Pinterest’s latest financing round had increased its price tag to around £2.4 billion.
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100% the right thing to do. They have investors at an $800 million valuation so if they sell for $3 billion, they won't make a big return. You need to stop focusing on Snapchat's business model and more on their investors business model. The founders have/will cash out and be fine but the investors won't so right it's go big or go home aka IPO in a few years.