I'm Glad Snapchat Turned Down $3 Billion, and You Should Be Too

Moneybox
A blog about business and economics.
Nov. 13 2013 2:32 PM

Three Cheers for Snapchat

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Snapchat logo

The Wall Street Journal reported Wednesday that Snapchat turned down a $3 billion acquisition offer from Facebook. The instant Internet consensus seems to be that Snapchat blundered.

If you're just getting up to speed, the way Snapchat works is that you send a message—text photo, whatever—to a friend or group of friends. But instead of the message being persistent, it "disappears" rather quickly. The young people seem to like it these days because it's a superior method of sexting to conventional messages that leave yourself open to the risk that nude or seminude pictures of yourself will circulate online. It's also used for nonpornographic purposes, though, and it's user base outside of the youth demographic is growing. People think it's silly to turn down the offer because Snapchat has no revenue and doesn't on its face look like a promising ad platform.

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I say three cheers to Snapchat!

The company's founders and investors may or may not be making a terrible mistake. But from the sidelines, I think one should almost always root against the acquisition exit. It's boring. It's lame. The bet when you turn down $3 billion is that there's some chance that in the future your company will be worth $30 billion or $300 billion and you want to reach for those stars and dare to dream. Many individual companies have suffered for daring to dream—think of Groupon, which had an offer on the table from Google—but it's hard to imagine the world suffering from that outcome. The reverse process where a good service fails to thrive in a larger corporate ecosystem (think Flickr at Yahoo) by contrast, is all too common. And sometimes you see a clearly threatening acquisition possibility. Apple seems to have seriously considered buying Dropbox at one point, which could have been a great arrangement for both firms, but it would have been bad for a world that needs cross-platform services in an universe increasingly dominated by a handful of platform players.

Will Snapchat develop a revenue stream? Will it find more plausible use-cases for its service that let it continue to grow? I don't know. Probably not. Most business ventures fail. But good for them for trying. The founders are smart and young, and if it doesn't work out, they'll do something else.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

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