Yesterday afternoon's Wall Street Journal report that mobile photo-messaging service Snapchat apparently rejected a $3 billion acquisition offer from Facebook has come as a surprise to many in the business and tech world. The surprise is two-fold, actually -- not just that Facebook would pony up such an astronomical amount, but that Snapchat itself believes it could be worth far more. Eyebrow-raising assessments of a relatively new mobile app I first heard of only a year ago and which is most notorious for engendering media hype over the app's potential facilitation of "sexting".
As with other high-profile Internet company acquisitions, such as Facebook's $1 billion purchase in April of fellow photo-app Instagram (with its 13 employees and $0 revenue) or Yahoo's $1.1 billion purchase in May of blogging-service Tumblr (which had never turned a profit), there is again considerable general befuddlement over the economics of such a deal and whether these high-premium purchases of niche competitors are a further proof of the re-emergence of the "dot-com bubble".
So what does Facebook see in Snapchat? It's easier to first eliminate the explanations that don't make sense: