Arrogant or astute? Two-year-old Snapchat rejects $3bn bid from Facebook

Most people would think that $3bn for two years’ work is not a bad deal.

But 23-year-old Evan Spiegel clearly wants to go on to bigger and better things than mere billions.

The Stanford drop-out just turned down a $3bn bid from Facebook to buy his company Snapchat, which was launched only in September 2011.

Snapchat is an app that lets users send each other photos that automatically get deleted after a few seconds.

Users are typically in their teens and early 20s, although users have to be aged 13+.

The Wall Street Journal reports that the $3bn all-cash offer would have been Facebook’s biggest acquisition ever.

It’s probably no coincidence that the proposed deal comes weeks after Facebook admitted it is losing traction with that age group.

Snapchat is yet to start making money, but Spiegel does have plans in place, according to an interview today with the BBC’s technology editor editor Rory Cellan-Jones, who writes: “While refusing to go into details – ‘we don’t want to spoil the surprise’ - he outlines a plan to get users to pay for added value services. This seems an unlikely proposition - Facebook and Twitter have relied almost exclusively on various forms of advertising as revenue sources, and it’s unclear that users who have grown accustomed to a free service can be persuaded to pay for extras. […]

“He goes on to outline a theory that social media businesses like Facebook and Twitter are seen as utilities, and therefore people will not pay for them, while apps like Snapchat are entertainment products and ‘people pay a lot for entertainment’.”

Watch this space – if, that is, it doesn’t self-delete within seconds.

Follow me @LondonlovesBiz and @sophiehobson

 

NOW READ THIS: Five tech start-ups that sold for $1bn in six years or less

 

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