Will Snapchat's gamble pay off?

To many analysts, it was a crazy decision to turn down such a huge offer. The owners of Snapchat were called foolish, arrogant and delusional youngsters who knew nothing about the intricacies of the corporate world. Everybody was surprised by the decision of such a small company. In the world of technology, such decisions are nothing but normal. When people evaluated Facebook back in the days at tens of million of dollars, a lot of analysts screamed at the top of their lungs calling it a crazy estimation. Facebook is worth more than $200 billion now. The same scenario applied to Google, Amazon, WhatsApp, Twitter, etc. If there is anything we should learn about the business model of technology start-ups, then it should be this; they attract and consolidate users base first, they think about money later. Now, how Snapchat is planning to make money, you may ask. The answer is: Like all the other social media platforms, by selling ads. If you ever noticed, all social media platforms generate no content of their own. All their costs are operational, which in turn means maximized profits. The business model all of them are adapting is selling ads. With mostly young audience active on these platforms, it is a golden opportunity for advertisers to pass their messages to this valuable segment of society, Kazinform has learnt from the Arab News. Snapchat has already started experimenting with this business model, although they are generating little revenues and no profits yet, they are on the way. It is a promising platform with some reports putting its user base at 100 million (Fortune magazine). A couple of months ago, news broke that Snapchat was raising more funds to develop the platform and that pushed its valuation to an astonishing $19 billion! With such value, and according to Fortune, Snapchat is a few billion short of Tesla Motors, the well-known electric cars company, and ahead of Symantec the world leading cyber security company. This last Friday, Snapchat CEO Evan Spiegel gave a speech at the University of Southern California's Marshall School of Business. He used that opportunity to comment on his decision to reject the Facebook offer. "I'm asked one question most often," Spiegel said, reported Mashable. "‘Why didn't you sell your business? It doesn't even make money. It's a fad. You could be on a boat right now. Everyone loves boats. What's wrong with you?'" It did not mater to him that people were calling him an idiot. "Well, it's true," he acknowledged. "We do have a sense of entitlement, a sense of ownership, because, after all, this is the world we were born into, and we are responsible for it." We can only wait and see how the Snapchat adventure will end up. Was it a good decision or a mistake to refuse the offer? "You are going to make a lot of mistakes," he advised. "I've already made a ton of them - some of them very publicly - and it will feel terrible, but it will be OK. Just apologize as quickly as you can and pray for forgiveness."