If you haven’t been paying attention to the news today, it’s been announced that Facebook is acquiring text-messaging platform WhatsApp for $19 billion; $4 billion in up-front cash, $12 billion in Facebook stock, and another $3 billion in restricted Facebook stock vested over the course of four years (that last part is the truly interesting characteristic about the deal). As a result of the deal, it seems that any hopes that Snapchat had of being acquired by Facebook are dead.
In the last three years, Facebook has spent $20 billion on acquiring social networking and communication platforms; $19 billion for WhatsApp, and $1 billion for Instagram’s acquisition that occurred in 2012. After spending that much on these platforms (and these users), can Facebook really justify digging into it’s piggy bank for ephemeral text messaging service Snapchat? It’s no secret that Zuckerberg wanted Snapchat desperately; from blatently cloning the application in December 2012, to making multiple acquisition offers in the billions of dollars, Zuckerberg saw a clear connection between purchasing the photo sharing application and Facebook.
Once the acquisition is finalized, co-founder and CEO of WhatsApp, Jan Koum, will join Facebook’s board of directors as part of the acquisition deal. Furthermore, WhatsApp isn’t particularly fond of Snapchat, mostly because of it being a competitor in the messaging application space.
Snapchat rejected Zuckerberg’s offer of a $3 billion acquisition in 2013, and the hot startup has lured Emily White away from Instagram to become the new COO of Snapchat. Most importantly is that Snapchat competes directly with Instagram more than ever now with the advent of its 24-hour ephemeral timeline, Snapchat Stories. While initial versions of Snapchat competed primarily with messaging apps, Snapchat’s Stories feature has people posting and consuming photos in a similar way as Facebook and Instagram.
Zuckerberg had tried once in 2012 to directly clone Snapchat’s application and failed. If he isn’t able to acquire Snapchat, or no longer wants to considering the price, the possibility exists that Facebook will try to develop its own take on ephemerality. Apps like Whisper and Secret have taken off because of people being able to post anonymously, just as Snapchat is making content ephemeral. People clearly want a different means by which they can share content other than Facebook or Instagram, and Facebook needs to find ways of providing that service to its users.
Now, Snapchat is left with very few options if co-founders Evan Spiegel and Bobby Murphy choose to sell to a larger tech company. Google, which reportedly offered as much as $4 billion for Snapchat would still make a lot of sense for both companies. Additionally Trencent, which reportedly has already invested in Snapchat, would also be an interesting match.
Snapchat doesn’t seem particularly committed to sell any time soon. The company will most likely have to struggle over monetization issues or growing pains, or have repeated issues with lawsuits and security nuisances to seriously consider an acquisition offer.