Only a few days ago, 23-year-old co-founder and CEO of Snapchat Evan Spiegel turned down $3 billion from Facebook.

Almost immediately, newspapers and the Internet alike went abuzz either hailing or disparaging him. Some quickly pointed to Mark Zuckerberg, creator of Facebook, who at the age of 22 famously turned down Yahoo’s offer of $1 billion.

Although the temptation for obtaining even greater wealth lies ahead, Spiegel should take the money now while he’s ahead.

He cannot be compared to Zuckerberg, who is now worth about $20 billion and whose company is valued to be substantially more. Based on the news reports, the circumstances involving the recent attempted buyout of Snapchat, compared to the past unsuccessful buyout of Facebook in 2006, make for very different situations.

Snapchat is a social media smartphone application. Users of the program take pictures with a self-selected self-destruction timer ranging from zero to 10 seconds and send them to friends. When friends receive the pictures, they see them for as long as the sender specifies. Then the pictures theoretically disappear forever. Just the business model in and of itself has many people questioning paths to profitability.

After all, Snapchat admits that it currently generates zero revenue.

Now if Spiegel had a long-term vision similar to Zuckerberg, declining cash would actually make complete sense. Why take $3 billion if you know that 10 years from you’ll be looking at $100 billion? The problem is, he doesn’t know what the future holds.

At present, it seems that Spiegel is holding out not for long-term gain, but the immediate future, which is pretty silly.

Snapchat has been given a valuation between $3-4 billion dollars. But considering that his vision going forward seems shaky at best, he’s competing in an area where his target market is the youngest of the young. In this area where there are diminishing returns on the additional cash, it is easy to see how quickly this could blow up in his face.

For Zuckerberg, his claim to fame was that Facebook was revolutionary. No product before his social media site had received the amount of active users who spent such a large amount of time using it. It spawned addiction. So even though advertisements popped up related to users’ likes, interests, posts and groups, the connection had been forged so deep that despite annoyance with the marketing, users did not leave the site.

But the Snapchat app has proved a competitor to the social media platform. Many of the new users of Snapchat are those who have grown bored of Facebook. A recent report by the Pew Research Institute gathered statements from teams admitting their boredom with Facebook. It also provided raw numbers demonstrating the growth of users on Snapchat.

But without a solid base of loyal users like Facebook has, Snapchat has to work that much harder to create a major influence.

Considering the makeup of Snapchatters and the nature of the program, Spiegel’s holding out for more money will soon be a painful lesson in diminishing returns. This simply means that if he and his co-owner continue to wait for someone with a bigger wallet to come to the table, they may end up doing things that hurt the existing business. Or even if they improve the business, those who wished to buy the company may just use that cash to create a competitor that could ultimately harm Snapchat.

Three billion dollars is a lot of money and every billion after that doesn’t really change the amount of items a person can purchase by any significant amount. There is an old saying: bulls (optimists) make money, bears (pessimists) make money, but pigs (greedy people) get slaughtered.

Choose wisely, Spiegel.

Fran Walker is a senior finance and accounting major. Her column appears weekly. She can be reached at fwalke01@syr.edu.

Published on November 18, 2013 at 1:34 am