Did you hear the one about the 2-year-old tech company that rejected a $3 billion overture from Facebook (FB)?
Evan Spiegel, the 23-year-old founder of Snapchat, a popular messaging app, turned down Facebook's offer because he believes his company may be worth even more, according to a story in The Wall Street Journal.
Is Spiegel nuts or rational? And is Facebook desperate or just losing its "cool"?
Related: Is Facebook Losing Its Cool?
The Journal also reports that Facebook initially offered "more than $1 billion" to buy Snapchat, then contacted the company again with an all-cash offer "close to $3 billion." Tencent, a Chinese Internet company, recently led an investment group that valued the company at roughly $4 billion, according to The Journal. So maybe Snapchat's CEO is not so crazy after all.
Facebook, on the other hand, "is losing its cool with younger kids," says The Daily Ticker's Henry Blodget. "When Facebook started out it was cool...but a lot of kids are saying 'I don't want to be on where my parents are.' [There's] nothing less cool than that."
Blodget says Facebook's Snapchat offer may make sense. It's "aggressive," but similar to Facebook's $1 billion purchase of Instagram, which was called crazy at that time but turned out to be "a great acquisition." And "Snapchat is growing even faster than Instagram was," notes Blodget.
And "cool" may be overrated. Facebook CEO Mark Zuckerberg told the Atlantic magazine that "trying to be cool" was never his goal.
"What's cool with the kids doesn't always turn out to be a great business," says The Daily Ticker's Aaron Task. "Teenagers are notoriously fickle."
Kids don't necessarily determine the next big thing in tech, writes Farhad Manjoo, the Wall Street Journal's tech columnist. "Kids are often wrong... Sometimes they are first to flock to technologies that turn out to be huge; other times, the young pick products and services that go nowhere."
So is Snapchat, which has no profits yet but a growing user base, worth more than $3 billion? Ultimately that will depend on how how popular it becomes. Pictures posted to the site remain there for 10 seconds or less, which can be appealing.
"People are getting tired of having pictures surface years later of some drunken party they went to that cost them a job," says Blodget. "So the kids are going to Snapchat. It's a new form of communication."
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