Snapchat Rejects Facebook Inc (FB): Why Social Giant Was Interested?

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Snapchat turned down a $3 billion acquisition offer from Facebook Inc (NASDAQ:FB). The photo messaging app refused to accept the all-cash offering from the biggest social networker, according to The Wall Street Journal’s blog.Snapchat Rejects Facebook Inc (FB): Why Social Giant Was Interested?

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CEO sees more value  

According to the report, Evan Spiegel, co-founder and CEO of Snapchat will not take up any acquisition offer until next year because he hopes that the value of the company will rise as the user base expands fetching $4 billion, according to an investment proposal by Chinese ecommerce company Tencent Holdings.

Digits reported that Snapchat concluded a $60 million funding round in June fetching it the value of $800 million. After three months, usage of Snapchat ballooned to 350 million “snaps” per day from 200 million in June. The company revealed that around 100 million pictures were shared last year.

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Snapchat recently launched “SnapKidz” version of its application for Apple iPhones and iPads, which allows the kids under the age of 13 years to take or draw pictures, add captions and save it. However, a sharing option is not given in order to abide by the laws, which restrict information that can be gathered about or from children.

Why Facebook is interested in Snapchat?

Earlier, Facebook offered $1 billion for Snapchat. Snapchat messages have the unique feature that make the messages and photos sent disappear after few seconds. Facebook might be keen to acquire the company considering the fact that the majority of its users access Facebook through mobile. Snapchat does not generate any revenue, according to the blog.

Facebook Inc (NASDAQ:FB) might be looking forward to Snapchat at a time when the teens are losing interest in the world’s largest social network. Snapchat is becoming quite popular amongst teenagers, something which Facebook is longing for. Another reason that entices Facebook in acquiring Snapchat might be that the company is always on a look-out for interesting apps that can attract a huge user base.

Last December, Facebook rolled over Poke app exclusively for iPhone, but it fizzled out in front of Snapchat. Also, last year, Facebook purchased Instagram, a photo sharing app for $1 billion at the time of announcement and at closing $747 million.

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Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at amanjain@valuewalk.com
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