You make "it's not Facebook" a key part of your value proposition. This was the case for Snap early on, and I believe it's a big part of the reason why they got so far. Their users needed a social network separate from their parents, and they had been trained to fear long-term memory upon which Facebook had built their product and their business model. WhatsApp was also successful in warding off FB Messenger's efforts to clone it, in large part because it offered independence and a very un-Facebooklike product experience.
Facebook has shown an impressive flexibility and willingness to pay the costs of making big changes when they need to, e.g., acquiring WhatsApp or shifting their product toward Stories. Still, a startup go a really long way by building a product that carries "not Facebook" as a key value proposition.
I'll indulge. When Facebook seriously have you in their sights, financially, the smart move is what Snap did: rush for IPO before your numbers start getting affected. Product-wise it appears that if Facebook make a billion dollar offer, accepting it is a wise choice to maximise usage growth and interaction.
Isn't it better for everyone who's a part of Snapchat or a pre-IPO investor that they didn't allow FB to buy them for $3B? Even if Snapchat goes to a $10B valuation (which likely won't happen this year) and stays around there, that'll still be worth it for almost everyone. Since a lot of insiders will have already taken some money out before then as well.
At this point though, simply as a consumer, I would have appreciated Snap being acquired by FB so that FB wouldn't bastardize all the other social networks to try and emulate Snap. But looking long term, I think this might be a good thing... just in the short term it really sucks.
There's a reasonable concern in the air that it's getting more and more difficult due to network effects, but the short answer is the same way you always compete with big companies -- you can be more agile and engage with the user base in a way that big companies just can't because of bureaucracies and unwillingness to take risks.
This aspect is what makes me think Snap might be a canary in the coal mine.
In the temporary image space, virtually all of the innovation has come from that company, whether it's the initial concept, expanding scope with stories, adding visual effects, etc.
In the end, it might not matter. Facebook repeatedly cloned Snapchat's features, starting with the Poke app in 2012 that Zuck reportedly wrote code for himself.
The result? They jammed it into all of their products (Insta, Messenger, WhatsApp, etc.) and seem to be riding the network effect to success.
Not saying that smaller players can't win, but man, brute force and a big network were really effective this time.
Seriously, though. I never understood why Groupon, Snap, etc. turn down these multi-billion dollar acquisition offers. It's not like these products/services have a huge impact on the world (if they were to disappear, who would really care?), take the money and run.
Instagram selling to FB is a potential mistake in hindsight. Even without FB's direct backing, IG was poised to grow like crazy. Probably could've IPOed or sold to FB or someone else for 10x or 15x 2 years later.
From what I've heard (don't quote me on this), I think Instagram was having serious financial difficulties at the time of the acquisition. The costs to run the service (media transfer and storage are a massive infrastructure cost) were astronomical. The Facebook buyout was almost the only way they'd stay alive without giving up a massive piece of the company in a funding round.
Aren't they better off not selling for $3B? Insider stocks will be able to sell their shares soon. Snapchat is unlikely to be at a $10B or lower market cap for the next year. So people have plenty of time to take some money out.
