Skip to main content



Snapchat, Facebook and Game Theory

The value of an object or physical product is fairly constant, or if it changes it is due to the market surrounding it rather than the object itself changing. This is not true in the case of apps and websites, as their popularity and demographic of users is constantly changing. These circumstances make it significantly more difficult to form a strategy when deciding whether or not to sell an app.

Facebook offered the co-founder of snapchat, Evan Spiegel, 3 billion dollars to purchase his app. Both facebook and snapchat are social media sites, but while facebook’s popularity is dropping, snapchat’s is rising, especially among the teenage demographic. This presented Spiegel with two strategies: to sell or not sell.

The players of this game are facebook and Spiegel. In this case facebook has already chosen its strategy, so it is up to Spiegel to determine his best response. If he chooses to sell, then his payoff is indisputably 3 billion dollars. However, if he chooses to keep the app, his payoff could well be higher, but he can not be certain.

Facebook has had a drop in popularity among younger users, while snapchat is only becoming more influential among them. Twitter, another site growing in popularity among the younger generation, is currently valued at 29 billion. Based on this, Spiegel’s payoff for not selling is much greater than his payoff for selling. This is evidenced by the fact that Spiegel chose not to sell the company.

http://www.csmonitor.com/Technology/Horizons/2013/1116/Why-did-Snapchat-s-23-year-old-CEO-reject-a-3-billion-buyout-offer-video

Comments

Leave a Reply

Blogging Calendar

September 2015
M T W T F S S
 123456
78910111213
14151617181920
21222324252627
282930  

Archives