Snapchat thinks it's worth more than $4B because it hasn't monetized yet

Snapchat thinks it's worth more than $4B because it hasn't monetized yet
Yesterday, we heard that not only has Snapchat rejected an offer of $3 billion in cash from Facebook, but the company also reportedly has an offer on the table for around $4 billion, and yet CEO Evan Spiegel still has no plans to sell the company for at least a year. It turns out that the reasoning for the patience is quite simple though: Snapchat hasn't even begun to monetize yet.

Instagram was purchased by Facebook for $1 billion because of its user base, despite the fact that it consistently lost money. Snapchat doesn't want to follow that path, and it believes that it has the perfect model to allow for monetization. According to an investor (not Snapchat itself), the key is apparently the fact that users have to press and hold on the screen to view a Snapchat message. Because of this action, you can almost guarantee the user's eyes are on the screen, making that the perfect time to slip in an ad. 

This is a much more powerful draw than in-stream ads that you'd find on Facebook or Twitter, where there is no guarantee that users will see the ad, let alone stop and look at it. CEO Spiegel has said he is open to the idea of serving ads, but that isn't the plan just yet, and there's no guarantee the app will serve ads in the fashion described above. We think an implementation like that would certainly be great for ad engagement, but it would also lead to more of a backlash from users because the ads would be so forced. Users like to have more of an option when it comes to ads, as we all know with the prevalence of ad-blockers.

source: AllThingsD

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17 Comments

1. McLTE

Posts: 922; Member since: Oct 18, 2011

Idk.. I would have taken the money and retired.. or work on something new. Things like this are volatile. Who knows when a developer will release the next big thing and leave snapchat in the dust. The unfortunate thing is the success of an app like this means to cash in they will bring ads to it, which will more than likely ruin the experience - especially if FB gets ahold of it. 4Billion? I couldn't turn down that payday!

2. androiphone20

Posts: 1654; Member since: Jul 10, 2013

a100%, the chumps will regret it down the road especially when they choose to monetize this overrated...thing

17. Dingy_cellar_dweller

Posts: 339; Member since: Mar 16, 2013

It got to a 3B offer because I'm sure they rejected earlier offers of lesser amounts. What if they accepted an offer of 50 Million early on.

5. cezarepc

Posts: 718; Member since: Nov 23, 2012

I would've sold it and retired on my mone'y interest alone. On the side I'll probably invest in some start ups that shows promise.

8. Dastrix unregistered

That's true, but I guess when its actually monetized and we know what its valuated at, then we can say for sure whether they made a good decision of rejecting $3B or accepting $4B for that matter.

13. donphone

Posts: 64; Member since: Oct 20, 2013

Smells like Yahoo...

3. _Bone_

Posts: 2155; Member since: Oct 29, 2012

It's absolutely crazy, you start some project, Instagram, Snapchat, Waze, whatever, and a few years later BILLIONS are flying around. I mean how many of us are on the geeky side of things? Imagine McLTE or androiphone20 above me coming up with something, and the road from PA forums leads to private jets and an artificial island at the Caribbeans or Dubai.

9. androiphone20

Posts: 1654; Member since: Jul 10, 2013

*high five* that, would be awesome. we just need something like livecode

4. oNEWorld

Posts: 140; Member since: Aug 01, 2013

how is this thing worth more than instagram lol

6. androiphone20

Posts: 1654; Member since: Jul 10, 2013

top of the line sexting tool ;)

7. androiphone20

Posts: 1654; Member since: Jul 10, 2013

top of the line sexting tool ;)

12. alpinejason

Posts: 262; Member since: Sep 06, 2011

or anything for that matter

10. PK1983

Posts: 215; Member since: Aug 08, 2012

New tech bubble about to pop.

11. jroc74

Posts: 6023; Member since: Dec 30, 2010

I WISH I could just turn down a 3 billion dollar offer like it was nothing.... I woulda sold it before the phone hung up or the lunch, dinner got served..

14. timepilot84

Posts: 113; Member since: Aug 16, 2012

I read an article this morning that explains why the company is probably worth $4B. They have a patented technology that requires a user to press and hold the screen in order to see content. If you don't press and hold, you don't watch a Snapchat picture or video. For mobile devices, this is the key to ensuring that users are actively consuming content. Including advertisers. This ability to confirm that users are exposed to advertising is worth a TON.

15. NexusX

Posts: 613; Member since: May 16, 2013

sometimes i begin to question the value of online advertising, i mean how do we measure the efficacy of online advertising? how do we quantify the value of advertising exposure? does anyone find it incredible how Google/Facebook managed bring in hundreds of billions of dollars from advertising alone? how has advertising changed from television to internet? how much value has mobile/online adverstising created over TV in the past decade?

16. LiyanaBG

Posts: 381; Member since: Nov 07, 2013

sometimes its good to keep things for a little longer. i think they made the right decision they believe they can do better than this. just like youtube,Instagram are valued more now after they got sold. they believe that there app is worth more they might get the right price if they wait a little longer.

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