Venice-based Snapchat Turned Down More Than $3B from Facebook

Facebook has dangled more than $3 billion in cash to woo Snapchat, the popular photo-messaging used by younger audiences, amid growing signs of waning interest among teens in the world's largest social network.

The Los Angeles-based company, founded by 23-year-old Evan Spiegel, recently turned down the offer because it's currently being courted by multiple investors, according to a source familiar with the matter.

The 2-year-old Snapchat has been approached with offers including an investment from China's Tencent Holdings that would value the start-up at $4 billion. Snapchat's mobile app allows people to send text and photos that disappear in what has been hailed as all the rage in a next wave of private social sharing.

"We don't comment on rumors and speculation," said Facebook spokeswoman Denise Horn.

Snapchat could not be reached for comment.

Facebook's bid for Snapchat comes amid lofty valuations in social media companies. Profitless Twitter went public last week and has a market capitalization of nearly $25 billion while Facebook's is well north of $100 billion.

The offer for Snapchat also comes as Facebook has acknowledged that teens are spending less time on the site. Facebook CFO David Ebersman spoke of the issue last month in the company's earnings call. The CFO's admission, along with that its News Feed ads had reached limits, sent shares tumbling from a 15% jump in after-hours trading to erase billions in valuation.

"If Facebook is saying they are having an issue with teens and they need to find an app for teen advertisers, then it's logical to find an app where teens are spending their time," says Forrester analyst Julie Ask.

Facebook purchased Instagram for $1 billion last year in what was seen as a defensive move to grab the photo app popular with teens. Instagram is a small team of developers with fewer than 30 employees; Snapchat is estimated to also have a small group of employees.

Messaging services, such as Snapchat, are growing at a rate beyond expectations, says Forrester's Ask. China's messaging service WeChat has ballooned to 400 million users in less than two years.

"The commercial value, however, is untapped and how these services will be monetized is an unknown," says Ask.

Snapchat has raised about $73 million in funding to date from investors including Lightspeed Venture Partners, Benchmark Capital, Institutional Venture Partners, SV Angel and General Catalyst Partners.