Where's the money in Instagram? The content is practically worthless and their only real value is in their userbase. Even though I use the Instagram client, most of the time I see photos, they come through Twitter. So that also reinforces for me that any value is in the users and not the actual content, which is mostly crap.
I'm more convinced that we're in a 2nd bubble now more than ever.
It turns out what Google was buying was a chance to maintain their lead in how people were going to use their computers.
Facebook is now buying a chance to maintain their lead with how people are going to use their phones.
Preventing Instagram from developing into something that has a negative effect on Facebook. It's a "keep your enemies closer" move.
I agree. So far I've mostly dismissed talk of "the next bubble", but this pretty much solidifies it.
Of course no one knows when the bubble will burst, so I guess investors are making as much money as they can before it inevitably does burst. It's a classic case of the "greater fool theory" http://en.wikipedia.org/wiki/Greater_fool_theory
But Google saw the potential in the usage stats. The YouTube search bar was the second most used search bar after theirs.
Similarly Facebook see the social engagement stats of Instagram being similar to their own.
Being popular != being valuable.
To compare it with YouTube is a massive overstatement. YouTube still has ~65% market share. InstaGram didn't even have an app for Android until a week back. How is that even remotely close to YT's domination of the video space?
In that it was a startup acquired by a big company? Yep.
> When Google bought YT it was a small team of people and a pretty nascent product that people really loved, and the usage numbers were out of control.
Like most startup acquisitions, the team size is relatively small and there is significant traction in the market with headroom to mature their footprint.
> They left the product mostly untouched and let it grow on its own. Though there was major criticism at the time, it is one of the best tech acquisitions of the past decade.
This is not going to be one of the best tech acquisitions of the next decade. YouTube helped to propel Google into content. It also helped to commoditise web video in a massive way: reminiscent of the way which Google commoditised search (YouTube is probably just short of being a byword for online video at this point).
Instagram is a photo service in a sea of other photo services. Photography has been around on the web in meaningful ways for a long time. Flickr lost out to Facebook in the community stakes, and Instagram is doing great in whatever-the-fuck market it's in (the share-to-my-twitter-followers market?), but this is not Google acquiring YouTube.
Bookmark this comment. See you in 2022.
You're mischaracterizing Instagram. It's not "a photo service," it's the photo service. 30M iOS users plus 1M new Android users in 12 hours.[0]
Instagram is the main mobile photo app. With this purchase, Facebook strengthens their mobile position the way Google strengthened their content position with YT. The acquisitions are very similar.
(edited for a stronger point)
[0]http://www.forbes.com/sites/anthonykosner/2012/04/07/instagr...
And what do they gain from Instagram?
A user base? Most of them are probably already on Facebook?
Technology for handling photos? Doesn't Facebook already do this as well as anyone else?
Design and UI talent for mobile apps? Don't they already have Mike Matas?
The question, of course, sounds a bit laughable. But the answer is a non-zero number big enough for facebook to pull the trigger and defend their territory(social networking & photos).
Edit: I know Zuck says they will continue to build Instragram. I'm skeptical.
Not only would he be going against his word - while the internal metrics of the company are going strong - but he would be killing an asset and destroying shareholder value.
Even Zuck isn't crazy enough to pay $1B for a growing company and just kill it. That would be totally irrational.
I suspect this may very well be the best tech acquisition since Google bought YouTube.
Good luck for both of them - even though I am wary of FB's growing clout and I don't use Instagram, it's nice to see a good service find a good home that can support it over the long term.
I am SOOOO happy that Google bought YouTube. Can you imagine a world without YouTube?
I sure can't. Not a good world anyway.
http://gizmodo.com/5841667/facebook-photo-library-dwarfs-eve...
First, it integrates an incredibly popular mobile destination into the Facebook ecosystem.
A lot of people have been using Instagram as a replacement for their built-in smartphone camera software. You don't even need to go on Facebook to post those photos, thanks to the Instagram Facebook app.
That's ad revenue and location data that Facebook would love to have more direct access to.
Second, Facebook hasn't really been focused on mobile until recently. Mobile features have been second to web features for a long time now.
I think that Facebook has woken up to how far behind they are in the mobile space, and wants to catch up quickly. Photos are probably the most important sector of the mobile space, especially now that phone cameras are generally as good as mid-market point-and-shoot cameras.
Hence acquihiring Mike Matas (Push Pop Press), and now Instagram.
there's a lot of people that wouldn't fit the bill for facebook friending but are perfect in a looser setting. In this perspective, even if userbase has overlap, I'd guess that the social graph on Instagram is radically different than the one on facebook for a lot of users.
Now depending on how much Instagram gets integrated into fb, that might become less and less the case and give an opening to another photo sharing service...
I don't know who Mike Matas is, but given the quality of the Facebook for Android application and the amount of time Facebook's been spending on it... well... $1 billion is still a lot to buy a team to make your Android app not suck.
Though, on that note, the Instagram team wouldn't be the one to buy. Another startup that (took ages to) port their UI to Android and kept the crufty old iOS appearance.
The second point is because I have been actively trying to avoid giving fb more data than absolutely necessary. No ill will towards Instagram.
Edit: spelling.
Surely it's already too late. They bought your data.
Why do we allow companies to sell personal data on as part of the company? Should this be legislated against?
FB really wanted Instagram. They've been in talks since August 2011: http://thenextweb.com/insider/2011/08/24/facebook-couldnt-ac...
"We will try to learn from Instagram's experience to build similar features into our other products. At the same time, we will try to help Instagram continue to grow by using Facebook's strong engineering team and infrastructure."
Assuming the first round of $500K was @ $2.5M valuation, giving those investors 20%. So the founders are left with 80%.
Further assume the 2nd round of $7M @ $20M valuation, giving those investors 35%. So the founders are left with 45%.
Further assume the 3rd round of $40M @ $500M valuation, giving those investors 8%. So the founders are left with 37%.
Also assume that the employee stock options pool is worth 10% of equity. Founders left with 27%.
There are two founders, according to Crunchbase [1], so assuming a 50% split for each founder, each founder has 13.5%.
At $1B, each founder walks away with a cool $135M in cash + Facebook stock (which is likely to appreciate significantly in a few months) - which is likely another reason they chose to go with FB as opposed to Google.
Not bad for 2 years worth of work.
If my math is correct, the founders may have ended up with more like $430,560,000 between them ($215,280,000 each assuming 50/50).
I was just doing some rough calculations to show an approximate 'low-figure' of their take.
It is very possible and likely that they took away much more (because all of the variables could have changed).
For instance, that first $500K round could have been convertible debt which would have converted in the $20M round. If that's the case, then those investors ended up with 2.5% instead of 20%. That drastically changes the math and gives the founders more equity and a better outcome.
That will likely push up demand for the stock in the short-term, thereby the price.
Aside from that, we have never seen a service have 800M users and still growing at the rate that FB is growing and have the stickiness that it has. So there is no telling how big it can get - which is why the valuation is so high.
There is no doubt that over the long term, FB will figure out a way to print money. It's just a matter of time.
source: http://allthingsd.com/20120409/breaking-facebook-to-acquire-...
Edit: Direct Source: http://newsroom.fb.com/Announcements/Facebook-to-Acquire-Ins...
The total consideration for San Francisco-based Instagram is approximately $1 billion in a combination of cash and shares of Facebook. The transaction, which is subject to customary closing conditions, is expected to close later this quarter.[1]http://techcrunch.com/2012/03/08/no-filter-required-instagra...
Those investors in that round had to at least double their money...if the price was indeed $1B, that's all they did. Just 2X. Although, the argument can be made that a 2X return in 1 - 2 months isn't bad...but then again, VC funds don't have a 2 month life, so over the long-term value (i.e. 10 years most-times) of that fund I am not sure how beneficial that is.
Although, I guess they can't be too pissed because it must feel good to be able to at least return something to their LPs in such a short time frame.
Oh, that's right. Revenue doesn't matter. "This time, it's different!"
Totally possible for Google to sink tens of billions into mobile and still wind up on the bottom of the value chain, commoditized along one axis by Facebook and utterly outmarketed by Apple (with its extraordinary profit margins and increasing domination of supply chains) on another.
Or maybe GOOG/Twitter is in the air, and Facebook is reacting defensively?
I was under the impression that Google paid that price (and, indeed, bought Motorola at all) for patents.
Google is doing just fine out of Android. iOS may be better marketed, but there are a hell of a lot more Android phones out there.
I don't keep super close track, so maybe Apple's commanding profit share lead is eroding sharply. Last I checked, "commanding" was indeed the word for it.
Again, all I'm saying is that you can spend a lot of money for a huge footprint in the market and still find yourself at the bottom of the value chain: you can be the guys facilitating a lot of commerce for other people without taking a significant cut.
If you don't believe Google cares about that, why are they wasting their time with G+? Facebook isn't going to be a search engine. Nobody believes that. The worry is that Facebook is going to commoditize search by moving the profits it generates somewhere else.
Total iOS devices: 315M (as of 2012-03-07) Total Andriod devices: 300M (as of 2012-02-29)
http://techcrunch.com/2012/03/07/tim-cook-talks-ios-device-s... http://www.guardian.co.uk/technology/appsblog/2012/feb/29/an...
Android is selling faster, but it has yet to have a larger installed base. It will likely happen soon, but iOS had a large lead in terms of start time and the iPad is killing in the tablet market.
Obviously there are many factors which will adjust the true installed base (broken devices, devices no longer update-able, etc.).
By what metric?
> iOS may be better marketed, but there are a hell of a lot more Android phones out there.
Yes. And Google has made more money out of those fewer iOS phones than it has from the many Android phones.
Instagram is a tool that has a limited shelf-life, with a userbase that is almost certainly already on Facebook. Declaring this some sort of coup for Facebook seems weird, given that the overwhelming sentiment is that Facebook has more net worth than brains at this point.
The second graf isn't worth responding to. I'm not as emotional about tech companies as you seem to be.
http://techcrunch.com/2012/03/08/no-filter-required-instagra...
http://techcrunch.com/2012/04/09/right-before-acquisition-in...
> we're committed to building and growing Instagram independently. Millions of people around the world love the Instagram app and the brand associated with it, and our goal is to help spread this app and brand to even more people.
Facebook has always integrated whatever it purchased (that I know of) very tightly into the core product, or just done an acqui-hire. Instead, they've taken what is arguably the best way to share photos and decided to keep it as a product that exists on its own.
This is a major strategy change for Facebook and speaks to something I have suspected for some time - they now understand that in order to continue spurring growth, they cannot just acquire and roll in every product. As the ecosystem starts to hit a long-term maturity cycle, other products that fulfill particular functions better will be key to maintaining dominance over the market as a whole.
Let's face it: G+ cannot topple Facebook (though it probably wasn't intended to anyway), Twitter is fairly specialized and Pinterest has come up with a new way to share that fits neatly with the other two. Instagram makes immense logic as a purchase for Facebook as they'll control one of the most important ways people share photos outside their product, neatly roping everyone that uses it right into the FB circle without feeling forced to do so.
Instagram, in providing a photo sharing experience (at least) on par with Facebook's, spanning multiple "social platforms", facilitates user migration across these platforms. In the current context, any user migration between social platforms would (almost) inevitably dilute Facebook's share of user-time.
Thus, it seems reasonable for Facebook to acquire this possible avenue of departure and generally maintain its current state (i.e. Zuckerberg's statement is honest) while guiding future evolution of Instagram's product to subtly guide the flow of users along "Instagram Avenue" towards Facebook, rather than in its current unbiased direction (i.e. Zuckerberg's statement is disingenuous).
Though useful from a business perspective, this sort of defensive acquisition is discouraging to me. I would prefer to see the evolution of "social" in general towards an open protocol for maintaining the actual user<->user graph structure and piping of information along it, with a loose confederation of services such as Instagram providing the content hosting/delivery. This would decentralize control of people's social graphs, with control being restricted to subsets of the shared content and its flow over the graph, rather than the actual graph structure itself. I.e. market-driven services such as Instagram would compete to control portions of the infrastructure implementing this new construction, which one might call the "world wide (social) web".
TLDR: Facebook's purchase of Instagram permits them to simultaneously reduce the instantaneous rate of user migration across social platforms while preventing the emergence of a competitive open social platform/protocol, the evolution of which would be greatly facilitated by the prior existence of third-party social content infrastructure such as Instagram, which reduce the size of the "chicken and egg" problem confronting any attempt at an open platform.
Besides messaging and photos, I'm thinking that few things are left as halo products around Facebook. There's no reason for a "games" app - to me, at least - but there might be logic in acquiring something like Turntable.fm for music.
With Instagram, I think it's a case of user acquisition trumping product strategy. If lots of people are joining Instagram, Facebook wants to own it regardless of how it fits with their main brand.
Day before deal: - Instagram closed a $50 million Series B round from Sequoia, Josh Kushner’s Thrive Capital, Greylock and Benchmark at a $500 million valuation.
Day of deal: - Company gets purchased for 1 billion. - All investors instantly double investment.
How about : "Let me invest right now, so that I won't vote against the FB offer you've got on the table".
Or "If you let me invest now, I can make a recommendation to the FB board that they acquire you".
"It's common to use an impending investment valuation to drive a higher acquisition valuation. Strategic/acquisition values are typically much higher than investment values. eg, as of today, Instagram is worth more to Facebook than it is to Sequoia, because Facebook gets strategic value in addition to market value. Also note that an investor with a signed term sheet would be fully aware that acquisition discussions were taking place, as well as what valuation range they were in. I would be surprised if Sequoia did not go into this with eyes wide open. They win either way - an instant 2X multiple on investment (and a crazy high IRR), or a highly desirable company that they believe has growth potential. Call me jealous."
Now, should I continue to use Instagram at all, I'm definitely not going to share my location.
It's hard to know where to root. Independent start-ups give great competition to the big players, but I know a lot of people go into an MVP with the goal of making a large exit. It's a great way to get funding for your next startup.
http://windonaleaf.net/post/20464525754/instagram-perform-ad...
In 2 years, nobody will remember what instagram was.
It used to be a better world when they just tried their best to get acquired without making public claims to the contrary.
In any case, I bet you can expect them to force everyone to use Facebook for logging in. Yahoo eventually forced us Flickr users to get Yahoo accounts in order to log in.
It seems strange that they're deciding to keep the Instagram social network up as its own independent social network, that leads me to think that their acquisition was really for their big data talent and not just to squash a smaller social network. I wish Mike Krieger's tech talk was more than two days away now, so we could hear about how they're going to merge with Facebook's big data issues too.
It's really too bad Instagram sold so soon. I hope they took mostly money.
Source: http://www.wired.com/epicenter/2012/04/facebook-buys-instagr...
Web bubble 2.0 can't burst soon enough.
Anyone recall this back in the day? Yahoo! buying BCST.com http://money.cnn.com/1999/04/01/deals/yahoo/
1. If Facebook has $1 billion to spend then they must be making a lot of money.
2. If Instagram is worth $1billion then surely Facebook is worth $100 billion.
I hope Facebook is careful with this one…
With all the news of talent acquisition and subsequent shutdown news, my first reaction was "oh god! yet another shutdown!".
Thankfully there are some very good statements in the announcement. "...we're committed to building and growing Instagram independently. "
Hope this is true especially for the sake of all the startups that are betting on Instagram and building associated products on top.
iPhoto is not half bad. http://itunes.apple.com/us/app/iphoto/id497786065?mt=8
Even if it's made the default photo sharing app in the next release for iOS 5+ users for whatever reason, and integrated deeper come iOS 6 this summer, they'd instantly have access to several times Instagram's userbase.
They could using this as a bargaining chip in their negotiations to integrate FB into iOS / iTunes. Because Facebook, a public company, cannot have a $1B acquisition become irrelevant in a couple of months.
Or maybe it'll be folded into the horrible UI mess that is FB and go away....
http://www.latimes.com/business/technology/la-fi-tn-why-face...
Which basically has Facebook buying them because of the social traction. Suggesting that perhaps they did not want this to be part of Google+ which has a lot of pictures but not the same as Instagram does with the social connection.
AFAIK instagram didn't make any cent. Premium filters and and ads would be the first choice, but I heard they decided to focus and grow in people loving their product.
Another big thing to deal with is: to sell or not?
I find it interesting that Mark and Facebook were able to buy a company for $1 billion. Its like the joke chris rock said about being wealthy.
"Shaq is rich, the white man that signs his check is wealthy"
"A million dollars isn't cool. You know what's cool? A billion dollars."
That'd be epic.
If Facebook kills my favorite platform, that would make for a really sad day.
1. What role did the Android app play? 2. When did these two start communicating?
I had no idea my account was worth that much.
I was very confused since only the USA, Canada and the UK use 1 billion = 1 milliard instead of 1 billion = 1k billiard
