Messaging Service Snapchat Spurned Facebook Bid; Startup Is Being Wooed by Investors Including China’s Tencent

Messaging Service Snapchat Spurned Facebook Bid

Startup Is Being Wooed by Investors Including China’s Tencent

EVELYN M. RUSLI And DOUGLAS MACMILLAN

Updated Nov. 13, 2013 7:35 p.m. ET

Snapchat, a rapidly growing messaging service, recently spurned an all-cash acquisition offer from Facebook for $3 billion or more, Evelyn Rusli reports. (Photo courtesy of Snapchat) Snapchat Inc., a rapidly growing messaging service, recently spurned an all-cash acquisition offer from Facebook Inc. FB +4.52% for $3 billion or more, said people briefed on the matter.Snapchat is being wooed by other investors and potential acquirers. Chinese e-commerce giant Tencent Holdings Ltd. TCEHY -1.33% had offered to lead an investment that would value the two-year-old Snapchat at $4 billion, according to people close to the discussions.

Evan Spiegel, Snapchat’s 23-year-old co-founder and chief executive, isn’t likely to consider an acquisition or an investment at least until early next year, the people briefed on the matter said. They said he is hoping Snapchat’s numbers—of users and messages—will grow enough by then to justify an even larger valuation.

A Snapchat spokeswoman declined to comment.

Snapchat’s specializes in mobile messages, including text or photographs, that disappear after a few seconds. The service hasn’t generated any revenue, but is especially popular among teenagers and young adults.

The approaches to Snapchat come amid rising investor enthusiasm for social media, and mobile-messaging upstarts in particular. The unprofitable short-messaging service Twitter Inc.TWTR +1.67% is valued at roughly $25 billion after its initial public offering last week. Pinterest Inc., an image-sharing app, last month raised $225 million from investors who valued the company, which also has no revenue, at $3.8 billion.

Facebook had earlier offered to buy Snapchat for more than $1 billion, the people briefed on the matter said. In recent weeks, Facebook representatives contacted Snapchat again to discuss an all-cash offer that would have valued Snapchat at $3 billion or more. At that price, it would be Facebook’s largest acquisition, more than double the nearly $1 billion it paid for photo-sharing social network Instagram in 2012.

Facebook is interested in Snapchat because more of its users are tapping the service via smartphones, where messaging is a core function. Facebook has rapidly increased the share of its revenue coming from mobile advertising, but said last month that fewer young teens were using the service on a daily basis.

Tencent, a diverse Internet company, owns WeChat, a major messaging service in China, and has a stake in KaKao, a popular South Korean app. It was vying to lead a group of investors that had offered to invest $200 million in Snapchat at a valuation of roughly $4 billion.

In June, Snapchat raised $60 million from investors including Institutional Venture Partners; that round valued the company at $800 million. Three months later, Snapchat said its usage had nearly doubled, to 350 million messages or “snaps” per day, up from 200 million in June.

If Snapchat pursues an investment early next year, Mr. Spiegel is expected to sell a block of his stock worth millions; he has recently told investors of his interest in doing so, according to people familiar with those conversations.