Snapchat Turns Down Facebook’s Acquisition Offer

            

Details


Case Code : CLBS136
Publication date : 2014
Subject: Business Strategy
Period : 2011-2013
Teaching Note : No
Countries: USA
Industry : Internet
Length : 03 Pages

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Abstract: ICMR India ICMR India ICMR India ICMR India RSS Feed

Snapchat Inc. developed a photo messaging application in 2011. The unique ephemeral nature of the application very quickly captured the imagination of not only the youth but also of investors. Snapchat had also attracted an offer of US$ 3 billion from Facebook, which was turned down by the founders. The case discusses Snapchat’s inception, growth, the controversies it got into, and the possibilities of its becoming the next big thing in the social media.

Issues:

The strategies companies in social media follow
The complexities involved in social media
The challenges and opportunities that tech start-ups face


Introduction

On November 13, 2013, The Wall Street Journal reported that US-based Snapchat Inc. (Snapchat), a photo messaging application founded in 2011, had spurned a US$ 3 billion buyout offer from the largest social networking company in the world, Facebook Inc. (Facebook). With this, Snapchat joined the league of startups that had turned down multibillion dollar acquisition offers from tech giants.

Prior to the Snapchat refusal, deal-of-the-day website, Groupon Inc., had rejected Google Inc.’s US$6 billion offer. Facebook and Twitter had also turned down many acquisition offers in their initial years, but had emerged successful later on. At the same time, there were several companies which had failed to maintain their momentum after rejecting acquisition offers. These included Digg, a social news site founded by Kevin Rose, which was once valued at more than US $160 million with acquisition offers of over $200 million . It rejected such offers only to subsequently lose its audience to Facebook and Twitter and end up being sold for US$ 500,000 to Betaworks, a startup. ...

QUESTIONS FOR DISCUSSION:
1. Discuss Snapshot’s business model and the reason for its popularity among the youth and investors.
2. Did Snapchat make the right decision in turning down the $3 billion dollar offer from Facebook? Justify your answer.

Key words:

Snapchat, social media,  Facebook, Photo messaging, app, Evan Spiegel, snaps, acquisition, mobile application, self destructing snaps.



Note
* This caselet is intended for use only in class discussions.
** More comprehensive case studies are priced at Rs.200 to Rs.700 (US $5 to US $16) per copy.









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