Why Facebook Will Buy Snapchat in 2017
Facebook, the world’s largest social networking site with over 1 billion active users per month. In an effort to stave off competition, it bought both Instagram for $1 Billion and WhatsApp for $22 Billion. Now, Instagram is worth 49 times what Facebook paid for it and some speculate that WhatsApp could be worth $100 Billion in the long run. These moves were at first frowned upon by many analysts and investors, but once the profits started to churn, many were in shock. How could a company bet $22 Billion and expect it to pay off? Well, it did, and it took many by surprise.
Now comes Snapchat (pre-IPO). It’s no surprise that the Facebook owned Instagram is starting to look a lot like Snapchat. With the introduction of ‘Stories’ and its ability to erase these ‘stories’ after 10 secs, it’s no surprise Instagram is trying its hardest to stay on top. Instagram currently has +1 billion active monthly users, but has seen many users flocking to Snapchat lately. Snapchat currently has more than 100 million users. Even though it’s a relatively small number compared to Instagram’s 1 billion, keep in mind that it’s a growing brand, to the likens of how Facebook started out.
So How Much Is Snapchat Worth?
Some analysts say that Snapchat’s IPO could value it between $25 Billion to $35 Billion. Snapchat, also changed its corporate name to “Snap Inc.”, and are preparing filings for a listing and aims to sell shares in the first quarter of next year. Bloomberg states that “Snapchat has chosen Morgan Stanley and Goldman Sachs Group Inc. to lead the offering giving the former its biggest advisory role on a technology IPO since it led Facebook Inc.’s tumultuous listing more than four years ago. JPMorgan Chase & Co., Deutsche Bank AG, Allen & Co., Barclays Plc and Credit Suisse Group AG will also be involved as joint book runners.”
Now if take the low end of the IPO valuation of $25 Billion, this isn’t far off to how much Facebook paid for WhatsApp. And that deal is beginning to pay dividends. So if Facebook does make a move and purchase Snapchat, I would say they’d have to offer at least $ 28 Billion if not more.
This would damage Facebook’s earnings, but might pay off in the long run, as did Instagram and WhatsApp.
Time will tell whether a deal this historic will happen, so stay tuned to Quadoop for the latest.