Is Snapchat worth more than Four Billion Dollars? - gHacks Tech News

Is Snapchat worth more than Four Billion Dollars?

Snapchat, the social network that lets its users send messages to each other that disappear in a matter of seconds, has turned down two offers in recent time reportedly. A three billion Dollar offer from Facebook, and a four billion Dollar offer from Google.

The big question that came to my mind immediately after I read about this was why did the company turn down the offers, and what makes the other companies think Snapchat is worth that much money?

If you look at Snapchat from a third-party perspective, you see a social network with a considerable number of users. That's the companies strongest asset and what makes it attractive to larger companies. Other than that, it has little to offer.

The application and technology itself can be replicated for a fraction of the price that companies seem willed to pay for Snapchat, and while companies may be inclined to add the engineering staff to their own, it does not really justify this amount of cash.

What weights more in my eyes is that the service is not generating revenue right now, and that it is not clear how it will ever do so. Sure, it could display ads to users of its service, or launch a premium version that adds other features to it that users may be interested in. And those possibilities play a big part in its evaluation certainly.

But that has not been launched yet. So, we are back to square one. So how many users does Snapchat have? The company revealed in a blog post in October that 350 million Snaps are sent every day by users of the service. Information about the user base have not been published publicly though.

So why have the offers been turned down by Snapchat? The most likely explanation is that the company and its investors believe that they can get more for it. The daily Snaps increased this year along from about 60 million in February to 350 million in October showing a strong growth.

If the user base and its engagement is still showing strong growth signs, a decision could have been made to keep the company independently run for now as its evaluation will increase if that is the case.

The question that we have not looked at yet is if the company is worth the three or four billion Dollars that Facebook or Google would have paid for it, or if it is worth more as its founders and investors believe it is.

You could say that it is, considering that other companies would have paid that much for it. From a bystander's perspective, it seems like an awful lot of money for a company that generates no revenue at the current time. From a strategic point of view, it could make sense nevertheless, provided that users do not leave ship once the service is monetized.

What's your take on this? Is this a new bubble that is going to burst any time soon? Or are those evaluations making sense?





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    Comments

    1. ilev said on November 15, 2013 at 10:51 am
      Reply

      It is just a strategic buy.
      Bing loses billions each year yet Microsoft continues to invest in it. Xbox loses money as well. No Lumia smartphone device has any profit, including the “popular” 520. On the contrary, ALL lose money, and the couple of $$ Nokia makes each quarter come from the dump phones, yet Microsoft in willing to buy Nokia mobile….

    2. Nebulus said on November 15, 2013 at 10:56 am
      Reply

      I think this is more of a “buy and close” move, so the real value of Snapchat doesn’t matter here. All that matters to Google and Facebook is to have less competition.

    3. Olly said on November 15, 2013 at 11:19 am
      Reply

      Maybe they suspected (correctly) that bumping back the already huge offer would get them more publicity?

    4. imu said on November 15, 2013 at 11:55 am
      Reply

      “…send messages to each other that disappear in a matter of seconds..” this might get people think that no one keeps logs of their chats etc. so they may turn to use it for that purpose ,now “Big Players” are aware of that so they want to be the one who keeps logs and as information is the power so it’s worth it. ( just guessing ;)

      BTW.Martin have you heard of Intel’s upcoming technology SGX if so can you share your thoughts on this?

      1. Martin Brinkmann said on November 15, 2013 at 12:18 pm
        Reply

        There are apps that let you keep data. At the very least, you can take a camera and take a photo of the content that was shared with you. May not be ideal but if someone truly wants to retain information, it is possible.

        Intel’s Software Guard Extensions looks interesting on paper, but it all comes down to adoption I guess.

        I think this article gives a solid overview of Intel SGX: http://theinvisiblethings.blogspot.de/2013/08/thoughts-on-intels-upcoming-software.html

        1. imu said on November 15, 2013 at 12:26 pm
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          Wow,I’ve read it already and I was wondering if you agree with her point of view on this,now I see you do, me too so I guess I’m not getting paranoid yet.

        2. imu said on November 15, 2013 at 1:32 pm
          Reply

          did you read part 2
          hxxp://theinvisiblethings.blogspot.de/2013_09_01_archive.html

        3. Martin Brinkmann said on November 15, 2013 at 2:17 pm
          Reply

          Not yet, will do. Thanks.

    5. imu said on November 15, 2013 at 12:18 pm
      Reply

      …and yet how many people are not aware they have Lojacks pre-installed on their laptops?I was the one too until I released and got rid of it instantly.

      1. Coyote said on November 15, 2013 at 3:11 pm
        Reply

        That was a silly thing to do. The anti-theft in laptops has always been an opt-in feature, my ASUS came with it and so did the old Dell, they’re disabled in the bios unless you tell it to track the laptop. Ipads and the sort have it built in as an app but either way its the customers discretion if it’s used.

        As for this deal, it’s all about the user base. Unfortunately thats all bean counters look at and why the valuation is so insane. If this were a productive app that served some real purpose but only had 1/4 of the users they would never have made the offer. And if they add advertising or other hoops to jump through they’ll see those customers flee like the app were the plague. I see the same thing happening to Twitter over the next year/6months.

    6. Paul B. said on November 15, 2013 at 5:34 pm
      Reply

      Unless there are some serious patent protections in operation, SnapChat is playing a very dangerous game. This kind of technology could be adopted on the cheap by any chat program, and will be a significant selling feature as privacy becomes more important. Yes, it can be overridden pretty easily, but most of the time it will be adequate.

    7. Steve said on November 20, 2013 at 3:32 pm
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      Its just that the both the social networks get their revenue from the content that is put in by the users, if snapchat hits big time this could erode the value of the other two; not that both-big G and F are interested in snapchat its just to cannibalise the company.

    8. Traple said on December 4, 2013 at 2:03 am
      Reply

      LOL, SnapChat is done. There won’t be any more offers. There will be several services offering the same thing in a few months time. Non-paying tweens will continue to not pay when they move to the next fad.

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