Facebook’s (attempted) acquisition campaign

Smaller companies have made a habit out of pinpointing Facebook’s weaknesses and then do a better job than social media giant could do. Instagram’s photo-intensive news feed was something Facebook lacked. Now Facebook owns Instagram.

One area where Facebook struggles is its mobile app. The company is struggling to find ways to create mobile ad space, but the problem is larger than that. Facebook dominates desktop computers, but it is far from a similar position of dominance on mobile phones. The latest craze is Snapchat (see early blog posts). When Instagram grew more popular and became a competitor for Facebook, Facebook bought the problem to make it go away. Facebook is trying to take a similar approach with Snapchat, but it does not seem to be working. The Wall Street Journal reported Wednesday that Snapchat turned down an offer of $3 billion from Facebook.

Snapchat’s rejection of the offer is perplexing because it does not have any revenue stream. As BloombergBusinessweek’s Joshua Brustein put it:

“It’s very possible Snapchat will crash and burn before ever getting its hands on so many zeros again. The app doesn’t make any money, it’s caught up in a controversy over whether its founders cheated a friend out of his fair share, and almost no one who has graduated college gets it at all.”

Snapchat’s owners said they will not consider any acquisitions or investments until at least yearly next year.

This is not Facebook’s first failed attempt to buy Snapchat. Last year Snapchat turned down Facebook’s first offer. Since Facebook couldn’t have Snapchat, it tried to provide the firm with direct competition. Facebook released an app called “Poke” to compete with Snapchat in the “disappearing picture message” market. The strategic concept played off the idea that they would hurt Snapchat by taking away their monopoly on the niche market. The copycat attempt backfired on Facebook.

When it comes to mobile messaging, Facebook’s mobile messaging app trails the industry leader, WhatsApp. If Facebook continues is history of buying its competition, perhaps we can keep an eye out for a WhatsApp acquisition on the horizon.

4 thoughts on “Facebook’s (attempted) acquisition campaign

  1. At what point does costly acquisitions end up hurting facebook? Will they be able to keep dominance with this strategy or is it time for a change?

  2. I used to play a lot of the games that Facebook offered for free online…but eventually they lost the creative edge that I enjoyed and stopped using them. Some people I knew even paid money to upgrade the games which I always thought was a waste of money. I don’t think Facebook is always on the cusp of new ideas and by buying firms and integrating them they may quicken the end of the company.

  3. I agree with you that Snapchat likely made a terrible mistake by turning down the $3 billion. However I do think that given the diffusion of coding knowledge as time goes on, it will be increasingly difficult for any one firm to dominate the social media market.

  4. Facebook’s attempted acquisition may be a pre-emptive move — a purchase simply to prevent competitors from utilizing the company. Snapchat isn’t a firm that takes consumers away from Facebook, I would assume that there is a TON of overlapping consumers. Facebook acquiring Snapchat wouldn’t increase demand, it may only complement consumer experience.

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