This week’s price thus updates informal valuations of Snapchat, which only a while ago was deemed to be worth around US$800 million. Pricing of Snapchat and its peers is about pricing dreams and expectations, some of which will not come true. What you can do with audiences that exchange a reported 350 million photos on Snapchat each day?
Why would Facebook be interested in handing over lots of loot? The answer to that isn’t difficult. The service appears to be losing the youth demographic, which finds that a shift to start-ups such as Snapchat is an easy form of digital rebellion and sign of independence.
Facebook wants young eyeballs because they are perceived to be major spenders and less likely to prefer traditional media such broadcast television as their preferred advertising medium.
Facebook may also want Snapchat because it’s run out of ideas and out of advertising space. There are only so many ads you can park on a Facebook page before they blur and the consumers disengage.
A sceptic would say that Facebook’s looking a bit like Microsoft – large, wealthy, self-involved and not having much joy coming up with major innovations that are embraced by the market. If you can’t successfully invent at home, you go out with a wad of cash to capture bright developers and their products.
The dilemma for Facebook – if it ups the offer – and for competitors such as Microsoft is how to keep the sizzle once the deal has been signed.
We’ve seen a succession of search engines, network services and sites get absorbed and disappear without trace. The proceeds of those sales have enriched private equity and some developers who have gone on to start new enterprises.
From that perspective we might hope that Snapchat sells out and the happy entrepreneurs get to use the money creating the next “new new thing”.
Bruce Arnold is an Assistant Professor in the School of Law at the University of Canberra.
This article was originally published at The Conversation. Read the original article.
