Why Snapchat turned down a $3B offer

Take a look around and notice how many people are on their phone at any given time. Whether it is in traffic or the waiting room, we are attached to our mobile devices. Of the 6 billion cell phones on this planet, more than 1 billion are smartphones, capable of running the newest fad in mobile to mobile chat apps, Snapchat.

More and more teenagers and early twenty-somethings are turning away from Facebook and looking to chat apps like Kik, WeChat, and WhatsApp. These platforms have become the holy grail of mobile marketing. Currently sitting at the top of the heap is Snapchat, an app that allows you to send pictures to contacts, with you deciding how long they are allowed to view them. Then the pics are gone…forever.

With the recent Twitter IPO, and the Facebook IPO back in May 2012, it is easy to see why Snapchat would reject a $3B valuation. Currently, Snapchat believes their valuation to be much closer to the $6B mark. Why, you ask?

The age demographic that currently makes up the largest portion of the users for Snapchat, the 18-to-late 20s, is the big kahuna. Brands like Nike, Apple, Starbucks and the like will pay big bucks to access what Snapchat offers -- a channel into the minds and wallets of the young and hip, big spenders in todays’ market.

Word on the street is that Snapchat is looking to move forward with their own IPO following Twitter’s recent success. Remember, Twitter has consistently reported $50 million+ losses in the past few quarters. That means all the upside is in the IPO, and that is exactly the model that Snapchat is chasing. And that is why they did the “unthinkable” and turned down the $3B offer from Facebook.

It is good to be king, and Snapchat rules the roost.  For now.

- Casey Whittington