It seems as if $3 billion isn't enough for a profitless sexting app.
Facebook (META -0.52%) turned heads when it was reported that the social-networking giant offered $3 billion to acquire Snapchat, the company behind the popular app of the same name that lets users send temporary snapshots and shot video clips. The bigger shock seems to be that Snapchat reportedly turned it down.
There's no way to know whether Snapchat will eventually will be worth more than that. There were plenty of smart people out there in 2007 arguing that Facebook was crazy to turn down a $1 billion buyout offer. There are also plenty of companies that sold out way too soon.
The challenge for Snapchat is monetization. Will it be able to effectively wedge ads within its visual messages? Will advertisers trust that their brands are being represented well within the rogue environment of Snapchat?
This wouldn't have been the first tricky-to-monetize popular app Facebook acquired. Instagram continues to struggle with monetization. However, Instagram would have been a bargain at a cool $1 billion compared with Snapchat.
History should show that Facebook did the right thing here.
Briefly in the news
And now let's take a quick look at some of the other stories that shaped our week.
- A hot metal spill injured three employees at the Tesla Motors (TSLA 12.06%). Ths new is just another bit of bad luck for the stock that still remains one of this year's biggest winners.
- SeaWorld Entertainment (SEAS) posted softer-than-expected revenue for its telltale summer quarter, weighed down by a surprising drop in attendance at its theme parks. Does this qualify as a fail whale or a whale fail?
- Dangdang (DANG) posted another quarterly loss, but once again it posted a narrower-than-expected deficit. The Chinese e-tailer's revenue grew 19% for the quarter.
