Irrespective of present revenue, the acquisition value of Snapchat to Facebook, Google, Yahoo and co basically puts a floor on the valuation. E.g. if I am an investor and I think Google would pay $5B for Snapchat, it makes sense to buy it at $4B. So I guess the trick is not to figure out how much revenue Snapchat will generate on its own, but rather how additional revenue Google could generate if it owned Snapchat (which will drive the acquisition price).
I address this in the article: Snapchat doesn't want to be acquired because it thinks its creating its own new market where it has 100% market share.
I agree with you that Snapchat is intrinsically worthless, hence the title of the article.
Even if it was eventually acquired, how could the service be augmented to funnel users into a parent company (Google, Facebook) when the very nature of the application is to create media, then delete it. This builds no links or references to outside sources, no galleries of images, no way to generate ad revenue.
Every small, well-funded tech company ever has claimed that they weren't interested in acquisition. I certainly don't think that will keep the M&A folks at the big tech companies from chatting up Snapchat's investors.
For the second part, Google makes billions figuring out how to get ads in front of its users. I'm sure they'd be able to do something for Snapchat.
One other thing to consider: Google is sitting on something like $56B (and growing) in cash and short term investments. They could set $4B on fire and it really wouldn't alter their balance sheet significantly. Given its big push into "social" over the past couple of years, I could make the case that it's worth spending some of its cash to try and acquire a bunch of (admittedly fickle) users.
e.g. Sure we promised not to save your snaps, but we never promised not to remember who you shared your snaps to, what was in your snaps (think Google Goggles), how often you snap, etc.
Why would you buy it? It's probably going to die, if a big player doesn't buy it. They need to get acquired if they want to be alive and get time in order to find a way to generate revenues.
The comment you replied to answered that: Because of the hypothetical situation that Google would want to pay $5bn for it. You'd buy it to shop it around to the big players.
To a certain extent, the valuation of some companies can be pumped on the basis of to what extent the big players are likely to be competing for it, and not always on the basis of possible revenue, but strategy too. E.g. denying a competitor a company that is seen as having some percent chance of being a threat if paired with the competitor, or buying a company that is seen as having some percent chance of helping you become a threat.
Consider that even if Snapchat on its own was/is worth 0, if SnapChat has even a tiny chance of helping Google propel G+ into the position of a viable contender to Facebook, Snapchat is suddenly worth a huge amount to both Facebook and Google. It might even be worth a lot to Google even if Facebook only thinks that the combination would be a threat, if it'd make Facebook tie up lots of resources trying to "counter the Snapchat threat".
(in that vein, I think that one of the ingenious part of the massive Gmail quota was that while it got quite a bit of PR attention that mostly swayed geeks, it terrified large parts of Yahoo - I was at Yahoo when Gmail "hit" - and it tied up hundreds of man-years worth of product manager, engineering managers, developers, marketing people and others radiating out from the Mail team, all trying to figure out how to respond; I can only imagine the same must have been the case in Hotmail and others; as a feature Google could've offered a much smaller increase over the competition and still gotten most of the PR, but that huge bump, which was largely symbolic, triggered massive resource hogging responses from competitors)
And a lot of that kind of thinking boils down to guesswork, which can work both for and against them in terms of valuation.
