How do companies like Snapchat and Buzzfeed get such insane valuations? What’s really going on in the background?
5 answers from the community
If Facebook offers Snapchat $3 billion ,what is the minimum value of Snapchat
at that moment in time ?
$3billion minus $value of %chance of deal falling apart before its done
I quote from above "at that moment in time"
Bottom line most startups today are silly and worthless. Build it --they will come - is not even a creditable saying anymore.
Eyeball = Ad Revenue
Snapchat has millions of users with millions of messages sent daily. Snapchat could easily make billions from ad revenue when they start implementing ads on every messages sent.
Same with BuzzFeed. It has millions of readers.
The valuations are high for various reasons, including:
1 It's genuinely worthwhile for the acquirer to pay that much for what they get.
2 Pre-emptive move to either prevent an op becoming a competitor or being acquired by a competitor.
3 Stupidity - buyer doesn't know enough.
4 Greed - buyer knows it's overpriced but can still make a profit from revenue or subsequent sale.