Rejecting $4 Billion is Proves Social Media is Truly Worthless

By Jordan Utley-Thomson, Staff Writer

Snapchat has no clear business model, no revenues and no real future generating said revenues; and yet Facebook offered co-founder Evan Spiegel an astounding $3 billion for acquisition. He said no.

To make this even more ridiculous, Google offerred $4 billion a day later! Spiegal declined.

This is insane. Why is a photographic app whose defining feature disappears in under ten seconds worth so much?

Facebook is attracted to Snapchat as a way of appealing to their declining youth demographic via smartphone, However, this is a lost cause. Having a userbase that largely consists of fickle 13 to 25-year-olds is a deathknell in itself. These people have no brand loyalty. They shop for whatever is hot and abandon whatever is not.

But at least Facebook makes money. Sure, teenagers are losing interest in the social networking juggernaut, but they absolutely rake in the dough through advertising. In contrast, not a dime goes in or out of Snapchat.

And just better reason for the owners of Snapchat to take the money and run while they still can. Facebook and Google are basically throwing wads of cash at thin air.

But it doesn’t matter at this point: what is the difference in a few billions? The stain of hubris on Spiegel and co-founder Bobby Murphy is strong. It is no surprise that they were fraternity brothers at Stanford University. These guys make Jay Gatsby look modest.

At this rate, Snapchat could end up like Groupon. The founders of the deal-of-the-day website had their chance to cash out when they were high on the hype cycle. They knew better than anyone else that their financial numbers were terrible. Google offered them $6 bilion in 2010. When everyone quit drinking the Kool-Aid, Groupon turned into a joke: a far cry from its former self.

And this was just three years ago. In the tech world, things rise and fall incrediably fast, especially when driven by a young userbase. Remember when MySpace was relevant? Friendster? Better question: can anyone even remember GeoCities?

All it takes for Snapchat to come crumbling down is for word to get out that these teenage and young adult’s parents are using the app. That is how shallow of a demographic that Spiegel, Murphy, Zuckerberg and all these Silicon Valley geniuses are dealing with. This is a userbase that completely eschews delayed gratication and embraces the term “on demand”.

And Snapchat is not the only offender who is worth much more than it should be. Twitter lost $64 million last quarter, and they are still worth $13 billion. These companies should at least make a profit before they are considered to be worth billions.

It is the late ‘90s all over again. Investors laugh in retrospect about the dot-com bubble, but there is another one right in front of them. The needle is coming. When this bubble bursts, the fallout is going to be legendary.

Evan Spiegel and Bobby Murphy: get out while the billions are still there.

 

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