This week’s big tech news was that Snapchat turned down an all cash offer of $3 billion from Facebook according to The Wall Street Journal. First of all, to most reading this, let me ask the ultimate rhetorical question: “Who would turn down $3 billion?” My answer is most likely, no one. Regardless, let’s look at why Evan Spiegel, Snapchat’s CEO, may have turned this down. First, Snapchat may think it can grow without the umbrella of a big parent company. Joshua Brustein of Bloomberg Businessweek wrote regarding the spurned deal, “… Snapchat can grow without Facebook’s help. This means that Facebook has to compete on equal footing with each novel form of communication that comes along.” The point being made was that in the mobile world, a new technology is not dependent upon a strong platform to grow. This is counter to the ancient PC world of a few years ago. This spurned deal also says that if a company thinks it can grow just as fast on its own, that is the preference. As we have all seen, most startups that are offered millions – and especially billions, jumped at the chance. Think of all the startups that needed a strong platform. Most early-stage companies would want to be on a powerhouse platform like Microsoft, or Facebook to expand. Mergers and acquisitions happen because of efficiencies of scale, or the purchased entity can grow faster on a bigger platform. Snapchat might feel it does not need the umbrella. The second reason that Snapchat might not want this deal is that Facebook reportedly may no longer be “cool” to young teens. After all, with moms, dads, and even grandparents on Facebook – teens want privacy and their own space. Facebook is ubiquitous. Snapchat is not. Facebook knows the pros and cons of ubiquity and rightfully wants to find ways to obtain more users and monetize them. The trouble is that Spiegel and his users probably want to keep their own space. Third is a cultural divide. Most selling companies have always had one big concern: culture. The startup culture, and the established company culture are like “Men are From Mars, Women are From Venus.” While many merge, and are not alike, they learn to live together. This also pegs Facebook, still an incredible and cool company, as an established company. In fact, almost overnight, in some quarters Facebook is perceived as “too big to be cool.” When he appeared on stage, the late Apple CEO Steve Jobs sported gray New Balance 991 sneakers. When Google launched its Chrome operating system in 2009, co-founder Sergey Brin walked out in barefoot-looking FiveFingers shoes — which he called his “crazy monkey shoes.” Mark Zuckerberg’s Adidas Slides are as iconic as Facebook’s “Like” button. That anyone knows anything about these individual’s footwear says something about the power of culture – and fit (no pun intended). Most mergers fail – not because they did not work on paper, but because of a clash of cultures. We also see this in individual hires. At the top levels of executive hiring, I can honestly say that most companies end up with three or four great choices to take C-level jobs. And all candidates will have equal experience and qualifications for the job. Yet only a few will “fit.” In fact, most failures in hires are based on fit, not capability. As we have found out in matching executives with companies over the years – people are hired for what they know, they are fired for who they are. So, for Spiegel and the Snapchat team, they reportedly don’t need the Facebook platform to grow. The younger teen set might find Snapchat cooler – and, they might bolt if it were part of Facebook. Plus, by going to Facebook it would be a huge cultural shift. Yet, this might not be the end of Facebook or others to want to snap up Snapchat. Consider that when Yahoo recently purchased Tumblr in May, it was reported that Yahoo CEO, Marisa Mayer noted, “We promise to not screw it up.” Key was that Tumblr would retain its independence – its culture. But, even as an independent division of a public company, we all know it can change culture. The unrelenting quarterly demands of the public market force that change. So, Snapchat must be asking, does being bought disenfranchise both employees and culture. Conversely, Facebook has become grown up in a business millisecond to be a big company. And when you are big, it is hard to keep the startup culture – and in this new post-PC world, harder to get startups to say, “yes” to being acquired. I never thought I would see culture trump money with $3 billion on the table.
