Snapchat Rejects Facebook's $3 Billion Buyout Offer

Offer highlights market demand for new mobile photo apps.

Snapchat CEO Evan Spiegel poses in Los Angeles on Oct. 24, 2013.

Snapchat rejected a buyout offer from Facebook for $3 billion as the photo sharing phone application postpones a sale despite being courted by suitors interested in expanding their reach into the booming market for mobile devices.

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The photo sharing application founded in 2011 has been valued at $4 billion according to an investment offer made by Chinese e-commerce company Tencent Holdings, The Wall Street Journal reports. Snapchat's 23 year old co-founder and CEO Evan Spiegel is putting off any sale until at least early next year to allow the application's popularity to grow and justify a higher price tag, people briefed on Facebook's purchase offer told the Wall Street Journal. The social networking giant previously tried to purchase the photo sharing application for $1 billion, The Wall Street Journal reports.

Snapchat has become popular because it has a simple interface for sending photos and text messages, known as "snaps," which then disappear within a few seconds. The number of photos shared on the app has boomed from 20 million in October 2012 to 350 million in September, according to Snapchat, which discloses the amount of photos shared on the app instead of the number of users.

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Snapchat does not sell ads on the application but it received investment from venture capital firms including Lightspeed Venture Partners. Investors likely recognize that photo sharing and mobile traffic are new sources for advertising revenue. Approximately 54 percent of Internet users have posted original photos or videos to websites and 47 percent share photos or videos from elsewhere online, according to an October study published by the Pew research Center. Snapchat is also poised to challenge Facebook's photo sharing application Instagram. Approximately 9 percent of mobile phone owners use Snapchat and 18 percent use Instagram, according to the Pew study.

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