Facebook Attempts to Acquire Snapchat: A Strategy or a Ploy?
November 18, 2013
November 18, 2013
Facebook recently made a $3 billion cash offer to purchase Snapchat, a mobile app that allows users to send self-destructing digital images to their network of friends. Although Snapchat ultimately declined, this unprecedented proposal sparks our curiosity about the factors that motivated Facebook to make such a generous bid to a company whose revenues are still nominal.
The answer could be user engagement. Facebook has found it increasingly difficult to engage teenage users. Facebook CFO, David Ebersman, confirmed this notion during the company’s third-quarter earnings call, stating that the number of daily teenage users has been “slipping.” An increasing number of teens are turning to new social media platforms to avoid of the watchful eye of their parents and avoid being bombarded with advertisements.
It is estimated that Snapchat has a user base of approximately 26 million, many of whom are teenagers. Furthermore, Snapchat experienced a 75% increase in daily snaps, from 200 million to 350 million, between June and September of this year. This makes Snapchat a very appealing prospect for Facebook, as well as one of its largest competitors.
This offer is reminiscent of Facebook’s $1 billion acquisition of Instagram, a mobile platform that allows users to edit and share photos with their networks, in April 2012, just months before the company was set to go public. Facebook has always claimed its purchase of Instagram was prompted by plans to roll out an advertising program on the image-based platform. This argument is strengthened by Facebook’s recent affirmation that its platform has reached its full saturation point for advertisements. However, more than a year later, Facebook is still in the initial stages of implementing advertisements on Instagram.
Many critics in Silicon Valley are calling Facebook’s botched offer a sign that the social media network is losing its edge, viewing this as an act of desperation to extinguish all threats of competition. Despite skepticism, it is possible Snapchat will be the next social media platform to successfully employ advertising. What do you think?
Facebook CFO says number of teens using the network is “slipping.”
Facebook's $3 billion offer for #Snapchat is reminicent of it's $1 billion acquisition of #Instagram
#Snapchat's user base? Approximately 26 million people, many of whom are teenagers.