Google has gone so far that it is considering buying teen sensation Snapchat. It had informal talks with Snap. According to Business Insider’s Alex Health, an offer of $30 billion floated in 2016 before Snap’s last funding round and just before its IPO this year. Apparently, that offer was an open secret inside Snap. And was on the table after the IPO, too.
Interestingly Snap’s CEO Evan Spiegel showed no interest in selling out to Google. In fact, he had no interest in selling out to anyone else either. And this was despite the startup’s market cap slipping to around $15 billion after rising as high as $30 billion when it IP0’s in May.
One could imagine that news of Google’s interest would help Snap’s share price rise. And so it did: around 2.3%. This was great news after weeks of decline Snap’s share price was facing due to lockup expiration finally allowing insiders to sell stock and strong growth of Facebook’s Instagram Stories and WhatsApp Status clones of Snapchat.
While Google declines to comment to Business Insider, Snap told TechCrunch that those rumors are false. And if you think about it, it is possible that Google’s interest was very preliminary. And it is likely that it never rose to Snap’s higher ranks. It’s standard for startups to check out alternative paths before taking significant funding rounds or going public.
So, what finally happened is the following: Google’s growth-stage investment fund CapitalG ended up investing in Snap after the 2016 talks went nowhere. It contributed to the round valuing the “camera company” at $20 billion. And the great part is that the organizations have been buddy-buddy.
Here are some facts: Google chairman Eric Schmidt was an adviser to Spiegel. Snap runs Google’s office software suite. And Snapchat has committed to spending $2 billion on Google Cloud hosting over the next five years.
In May 2016 Snap had two choices: to go with raising money or being acquired. But it looked unchallenged in the full-screen Stories social media game. However, the game changed in August. Instagram launched its wildly successful Stories clone. It has diverted growth, mind share and advertisers from Snap ever since.
Let’s imagine what would each company get while joining forces. Google would get a top social property to make up for its Google+, Buzz and Wave flops. It could also gain data about people’s social graphs: where they spend time, what topics they care about. That would allow Google to improve its ad targeting and measurement
Benefits for Snapchat
Snap would gain a rich parent that could provide extra capital. That extra capital could be used to make acquisitions and build out its R&D- heavy augmented reality technology. Machine vision and image recognition algorithms from Google Search could unlock information about what’s in everyone’s Snaps. Moreover, Google’s advertising expertise and connections could boost Snap’s ad revenue.
So, in the end, they could align their Google Glass and Snap Spectacles hardware efforts to build a powerful AR device. But that is not all. The two companies have huge differences in their company cultures. Google is open and engineering-driven. And Snap is secretive and design-driven. Google’s culture could crash Snapchat’s culture.
Moreover, Spiegel is what is blocking changes. He and his co-founder Bobby Murphy have arranged Snap’s voting rights in a way that they have full control over the direction of the company. That means, that even if investors would love to take the $30 billion offer they couldn’t. As we know, Spiegel famously rebuked Zuckerberg’s offers to buy Snapchat. So he is known for following his gut over outside advice.