
Rejecting Billions, Snapchat Expects a Better Offer - boh
http://www.nytimes.com/2013/11/14/technology/rejecting-billions-snapchat-expects-a-better-offer.html?hpw&rref=technology
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nilkn
Snapchat is already a very rich company. The founders are probably indifferent
to the wealth at this point.

I also think a lot of people (myself included) find it hard to comprehend how
much money can be made selling stickers in messaging apps. It's mind-boggling,
and Snapchat, processing 350+ million messages a day, is in a very strong
position to leverage that eventually.

All that said, I'd accept a $3B cash offer in a heartbeat if I were in their
shoes. I wouldn't be confident in Snapchat's long-term survival. It might
double its user base in the next year and then swiftly die when the next fad
comes along. I feel that timing will be critical here. If they wait too long,
they could lose it all.

~~~
albeec13
Would you care to elaborate on how they're a "very rich company"?

(Edit: I actually read the article after my post and saw the section about
Benchmark Capital's $13 million investment. The rest of my comments still
stand...)

Now if you meant they have built such a large following that a buyout is
inevitable, and/or they stand to make a lot of money by introducing a business
model into the equation, then I'd agree. However, that does not change the
fact that the owners are incredibly greedy not to accept a $3 billion cash
offer, especially considering the fact that there's no guarantee they can come
up with a viable business model at all. Now that they've turned down an
arguably hugely inflated offer, they may have made a huge mistake in the long
run.

Let's not forget that Snapchat isn't exactly a difficult product to clone, and
the only thing going for them right now is user numbers. If they introduce a
poor money-making mechanism into it, users will not hesitate to flock to the
"next big thing" instead of forking over cash or dealing with intrusive ads.

~~~
chrislipa
>the owners are incredibly greedy not to accept a $3 billion cash offer

You can look at this another way -- Maybe greedy would be taking the life-
changing amount of money here, and they're not because they actually like
their jobs.

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npalli
From this article — "one roadblock in the talks with Facebook was that Mr.
Spiegel questioned whether he wanted to work for Mark Zuckerberg, Facebook’s
young billionaire chief executive”

Excerpt From: Nick Bilton. “Hatching Twitter." — “Biz and Ev had driven down
to Facebook’s campus a few days earlier to meet with Mark. Like most meetings
involving the chief of Facebook, it had been almost unbearably uncomfortable”

Looks like founders don’t want to work for Zuckerberg. Any company looking to
sell to Facebook would need a 50% Zuckerberg premium.

~~~
rtpg
Could Zuckerberg be forced out of the leadership now that FB is public? sounds
like a good reason to push him slightly aside, especially given how aqui-
hire-y everyone is recently

~~~
cylinder
No. FB is hardly a public company, even though its shares can be traded on
public exchanges. Zuckerberg owns about 28% of the company, but has ~57% of
the votes. Shareholders other than Zuckerberg have no say on the Board.

Even FB itself listed Zuckerberg's voting power as a potential risk on its own
S-1 filing. ”So long as the outstanding shares of our class B common stock
represent a majority of the combined voting power of our common stock, Mr.
Zuckerberg will be able to effectively control all matters submitted to our
stockholders for a vote, as well as the overall management and direction of
our company.”

~~~
sillysaurus2
I've always wondered how investors allowed that to happen. They collude in
every other matter, why not this one? FB needed investment to survive, so one
of the terms could've been "give up your power."

~~~
cylinder
FB was too popular at IPO, they could do whatever they wanted. Activists only
get involved when shares underperform. Otherwise, they have no leverage.
Shareholders only care about the stock price and nothing else.

~~~
waps
I don't understand that at all. Suppose the shareholders' dreams happen and
Facebook starts earning enough to make dividend payments that repay the value
of the stock in, say, 10 years.

What's to stop Zuckerberg from just directly diluting every other shareholder
?

(and of course, that's exactly what probably happens right now, because
Zuckerberg gets more stock options yearly than anyone else, so his voting
power does not dilute over time)

Please don't see this as an attack on Facebook. It's hardly alone in doing
this. And I do agree that Zuckerberg is probably a lot more qualified to run
Facebook than any (set of) investors. Still, why take the risk that he might
"cheat" ? Why are these shares selling ?

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guiambros
Groupon-effect.

In 2010, Google offered to buy them for $6B. One year ago today, GRPN hit its
lower point in history: its marketcap was less than a third of what Google
offered originally. Andrew Mason was fired after soon after, after missing
estimates, again.

The stock recovered considerably since then ($6.9B market cap today), but it's
a reminder for young entrepreneurs that the market is ruthless with one-trick
ponies.

Unless you have something on the table from Facebook, I fail to see what's
their long term strategy.

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raverbashing
Some time ago there was a "Startup FAQ" (can't remember the exact title)
circulating. But it has this:

"Q: A company wants to buy us, what to do? A: Sell"

I don't think truer words were ever spoken.

Are they really taking themselves that seriously?

Dropbox could get away with it, they have a good source of revenue. Not
something like Zynga.

Then you can use the 3B to either go on vacations or build something even
cooler.

Edit: nmb found it: [http://www.jamesaltucher.com/2013/08/the-ultimate-cheat-
shee...](http://www.jamesaltucher.com/2013/08/the-ultimate-cheat-sheet-to-
starting-and-running-your-own-business/)

~~~
wellboy
Why sell? After a valuation of $100M it's all just fun and games and a very
unique experience that fewer than a 10 people/year or so can have in their
lives.

You can't buy that with money.

~~~
raverbashing
The question is, can they get 3B (or more) in another way?

If Instagram's 1B was already excessive what's 3B for Snapchat?

You're mentioning valuation, but the 100M _do not exist_. Yes, things have the
value they are bought/sold for but selling 10% of something ends up skewing
those values.

Yes, it's a definitely cool experience. The you can pocket the 3B and go have
another fun experience with another company (or even at the same, unless the
company is absorbed/shutdown)

~~~
wellboy
They do exist. The definition of valuation is the price someone is willing to
pay it.

Facebook is willing to pay it, investors are willing to pay it. That's the
definition of valuation.

~~~
raverbashing
Yes, but here's the thing, for example a 1st round putting the valuation at
100M usually involved a purchase of a % of the company by a % of 100M.

Oh yes, if Facebook is willing to pay for it, the price tag today is 3B (and I
would definitely go for it because I think it's worth less than that)

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kylelibra
February 2013 - 60 Million Photos Per Day

November 2013 - 350 Million Photos Per Day

That's some serious growth. Seeing that much growth over a nine month period
probably has a huge influence on why they think a better offer will come
around.

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mc32
I think Groupon was said to have done something like this. Not sure that was a
face-saving move or not (rumor was Googs didn't like what they saw in their
books much). If it wasn't then they overplayed their hand and never got their
six billn. Wonder if this will end up being similar.

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diminoten
What's cooler than a billion dollars? A trillion.

I'm in my mid 20s, and I _already_ don't get Snapchat. When my friends use it,
I almost feel like they're trying to stay attached to being young - like
they're sending each other snaps simply because it's "what kids these days
do". Isn't that the textbook definition of a fad?

I am not really sure who would offer Snapchat more than $3bn. Maybe Google
will buy them out of fury, over all the data they're deleting (can't organize
the world's information if it's getting deleted).

Also, there's _no way_ they're actually deleting all of those snaps, right?
That's _sure_ to be a scandal at some point, when someone figures out how much
of the data they're keeping. Maybe not the images themselves, but I'd love to
build a network out of the "who sent snaps to who" data.

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leggo2m
The concluding line says it all:

“I’m facing a crisis in this industry, said Mr. Ma. “Young people, the things
they like on the Internet, increasingly I don’t understand it. This is my
biggest worry.”

~~~
increment_i
I'm on the verge of turning 30, so I'm not too old to remember being a teen,
but I can also sense a mild but tangible generational gap between me and the
teenagers of today. So while a 1 billion offer for a chat app seems outrageous
to me now, I know that Teen-Me would be all over something like snapchat.

I don't know what that says about what kind of software I should be building,
if it says anything at all.

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antonius
Anyone else not able to read the article? NYTimes prompts me to register
beforehand.

~~~
needcaffeine
Incognito mode, perhaps?

