Facebook Tried To Reach Teens Through $3 Billion Snapchat Offer, But No Deal

Facebook reportedly offered almost $3 billion cash for Snapchat Inc., a deal which its CEO has passed up on. The report simultaneously shows what Facebook is willing to do to reach a younger audience, and how confident the up and coming social media company is in its future.

Last year, Facebook offered over half a billion for Instagram, a figure that some observers were amazed by. But Instagram accepted the $1 billion offer, while Snapchat has declined bit four times that amount.

The almost $3 billion offer, which was offered in all cash and rejected by 23 year old Snapchat Inc. co-founder Evan Spiegel in recent weeks, comes at a time when Snapchat is increasing in popularity with young teens and Facebook simultaneously is seeing a drop in use of its social media site from the same demographic.

While Snapchat is reportedly "being wooed" by other investors who may offer as much as $4 billion, giving a sense of why the company might be reluctant to accept an offer from Facebook right now, what is incredible about the investment energy surrounding Snapchat Inc. are the details about the young social media app and company. According to the Wall Street Journal, Spiegel's Snapchat Inc. has no business model, no sales, and no revenue.

Of course, Twitter had no net earnings but still managed to get an over $10 billion market valuation and an IPO value of roughly two and a half times as much. And Snapchat, run by a CEO that ironically mirrors Mark Zuckerberg in his path to social media magnate, has much to offer beyond the hard, fiscal numbers.

Spiegel - who dropped out of Stanford University to run his burgeoning social media company - has a company that has almost doubled in usage in the past few months, according to its September figures. In June, Snapchat had 200 million messages exchanged, while by September, the service was up to 350 million.

Snapchat is a photo messaging social media app that allows users to take photos or short videos and add text captions or drawings to them. Users can send the resultant "Snaps" to friends, who can only view the media for one to 10 seconds - a time limit set by the sender. After that, the "Snap" is deleted from the recipient's device and (supposedly) the social media network's server.

Snapchat is available on both Android and iOS, and is mainly used by 13 to 23 year olds, a demographic that Facebook is especially interested in. According to both a months-old Pew study and another survey, published in late Oct. by financial analysts Piper Jaffray, Facebook is losing its teen audience. Jaffray's analysis, in particular, found that Facebook's reputation among teens had dropped from 42 percent last year to 23 percent this fall, while "other" - a category that is likely heavily influenced by Snapchat - rose form 2 percent to 17 percent in one year.

The company's chief financial officer, David Ebersman, basically admitted as much during Facebook's Q3 earnings call: "Our best analysis of youth engagement in the U.S. reveal that usage of Facebook among U.S. teens overall was stable," said Ebersman,"we did see a decrease in daily users specifically among younger teens."