ADOTAS — Facebook seems to be feeling the pressure from investors to recapture the attention of teen audiences with its offer this week to purchase popular image and video messaging service Snapchat for more than $3 billion. Unfortunately the deal apparently was just not sweet enough for Snapchat founder Evan Spiegel, who declined due to receiving multiple offers.
In Q3, Adotas reported that Facebook’s earnings came in higher than expected at $2.02 billion, but the site was dropping in popularity with teens who have gravitated to newer messaging apps and services. I then posited that in order for Facebook to recapture the attention of this core demographic, it needed to purchase Snapchat.
Last month, Facebook CFO David Ebersman publicly acknowledged that teens are spending less and less time on its social networking site, triggering concern by shareholders causing its stock to drop from a 15% increase in after-hours trading.
“If Facebook is saying they are having an issue with teens and they need to find an app for teen advertisers, then it’s logical to find an app where teens are spending their time,” says Forrester analyst Julie Ask.
According to USA Today, the 2-year old Snapchat is being courted by a long line of potential suitors, including China’s Tencent Holdings, that would value the start-up at close to $4 billion. To date, Snapchat has raised close to $73 million in funding from investors including Benchmark Capital, Lightspeed Venture Partners, Institutional Venture Partners, VP Angel and General Catalyst Partners.
From an industry perspective, Facebook’s offer to purchase Snapchat is a tremendous validation of the app’s momentum over the last two years. The messaging company has quickly become social media’s media darling, providing a novel way for people to send photo and video messages to others that “disappear” a few seconds after viewing.
The popularity of Snapchat (founded by Spiegel, pictured) hinges upon the growing online privacy concerns that consumers and teens have about social networks, and that reputations and future job opportunities can be damaged with a single controversial status update or the upload of photos with questionable imagery.
Only time will tell what Snapchat’s next move will be, but unless Facebook is willing to swallow its pride and pony up an large enough stack of cash, it won’t be riding in the saddle with Facebook anytime soon.