Tuesday, February 18, 2014

Social Media and the Ever Expanding Dollar

Social Media and the Ever Expanding Dollar

It's well known by now that the "vanishing" picture and video platform known as "Snapchat" was made a buyout offer from Facebook for $3 Billion (That's Billion with a "B"). It's been rumored that Google may have even made an offer for $4 Billion.

This wouldn't be the first time that large tech companies, Facebook included, have bought out their competition. It seems to be easier for the powerhouses, in many cases, to buy out their competition rather than trying to compete with them. This eliminates two birds with one stone - By adding the competitors services to their own portfolio and eliminating the competitor.

The reason Facebook was so interested in Snapchat is because they found that recent data was showing a wane in Facebook's teenage users. For whatever reason, whether kids didn't like that their parents were on the platform, that they couldn't escape the prying eyes of their peers or that it just wasn't "cool" anymore, teens just weren't using Facebook as much as they were in the past.

Enter Snapchat. A mobile platform where you can either take a picture or record a video, and set a time (from 1 to 10 seconds). Once that image is viewed and the time you set expires, the video/photo is deleted forever. Teens loved that they could say and do what they wanted and not have to worry about it showing up somewhere else. Facebook attempted to recreate this exact same thing with a short lived app called "Poke" which was essentially the same thing, but it could never get off the ground and quickly failed.

In 2012 Facebook did much the same thing it planned to do with Snapchat, to Instagram. Instagram at the time was a fledgling photo sharing/filter company and was only a year old when Facebook bought them out for $1 Billion.While the practice of buying out your competitors isn't new, what was quite shocking to the world is that a start up company (Snapchat) that had been created only 2 years prior was receiving a buyout proposition for 3 billion dollars... and they refused it.

TwitBits on Facebook Snapchat Buyout Offer

No one is still 100% sure on why they refused it, but some speculations include that the founders/creators were told by an investment firm that their app was worth more than that, while others say that they wanted to stand up for themselves and show that the "big players" couldn't just buy out whomever opposed them. Whichever the correct answer is, many were shocked.

What are your feelings on this? Do you think Snapchat should have taken the offer? Why or why not? What does this say (positive or negative) about some of the big names such as Facebook and Google that are looking to buy out their competition? Do you think this practice is becoming (or has already become) the norm?