Once every now and then, there is a start-up that seems to have an incredible valuation. Snapchat seems to be one of them, with Facebook offering them $3 billion, in an effort to attract young people, who seem to be increasingly ignoring Facebook lately. But to everyone's surprise, Snapchat turned down the offer, because apparently their valuation was already at $3.5 billion from before. A new rumor says they may have turned it down because they also got another offer from Google – of $4 billion.
That kind of valuation seems absolutely crazy, when you think that although they haven't made public their number of users yet, they're likely to only have a few tens of millions of users in US. Instagram and Tumblr had more than that, and they only for a lot less ($1 billion). Whatever this company is doing, it must have one hell of a pitch, that must've made Google think that they are the "next Facebook" or something like that.
But is Snapchat the next Facebook? I wouldn't say it's impossible, but it's definitely very hard to believe that right now, and it's also very hard to accept a $4 billion valuation with only tens of millions of users.
Google has recently refused to pay more than $1 billion for Whatsapp, which has over 300 million users (probably close to 400 million by now), and while I thought that price was a little high, its almost pocket change when you compare that Whatsapp wanted $1 billion for 300 million users, and Snapchat wants $4 billion for 30 million users. If Google is willing to pay this much, then buying Whatsapp, too, even for $2 billion is a nobrainer at this point.
I'm not sure how Snapchat plays into Google's strategy with Google+, because Snapchat's value proposition is that its a privacy app, and it keeps people's messages private, while Google will probably want to mine all that data, probably destroying the service and chasing everyone away in the process. This is why it's so crazy they'd be willing to pay so much for something that's so incompatible with Google's business model, unless what Google wants is to specifically undermine the privacy of Snapchat, if they are worried that people will want more such privacy apps in the future.
On the other hand, if they bought Whatsapp, they would immediately have a messaging platform (Hangouts/Whatsapp) that's bigger not just than Apple's iMessage, but also Microsoft's Skype. So it's hard to say whether it's a mistake for Google to pay that much for Snapchat or not, right now, but if they do that, it would definitely be a mistake not buying Whatsapp, too, for just a little more.