Acquisitions happen every day. Big companies acquire smaller companies for their product, customers, talent, knowledge. It’s like big sharks eating small fishes in the ocean. Very ordinary event.
But some acquisitions stand out. Facebook acquired Instagram for 1 billion dollar is such an acquisition. In my opinion it stands out for few reasons,
- Instagram is not even two years old
- Instagram has only one product and that is photo sharing app with bunch of filters. But to be fair, they were good at what they were doing. In less than two years, they have 30 million plus users.
- Instagram has 13 employees.
- Instagram has 30 million plus users.
- Instagram hasn’t made any money yet.
So what made Facebook to pay 1 billion dollars for Instagram? What Instagram has and Facebook doesn’t have and that is worth 1 billion dollars?
Like any other acquisitions, it has very complex answer.
Facebook has some problems and Instagram is the quickest solution.
- Though Facebook has 100+ million active users using its website, it has very small user base in mobile platform. So Facebook wanted to strengthen its mobile presence before its IPO. On the other hand Instagram is purely a mobile company. Their website is nothing but links to their apps.
- Though Facebook users share 250 million images daily, Facebook’s photo sharing is very basic. You take a picture [after several clicks/touches ] and share it. Most mobile pictures look really bad and Facebook doesn’t help user to take beautiful pictures. Where Instagram makes people happy by turning ordinary pictures to beautiful pictures. If Facebook didn’t acquire Instagram, it could be competing against Facebook.
- Facebook reports that, photos get more participation than text. I use very little Facebook these days, but videos and pictures always holds my attention longer.
Facebook acquired Instagram for its technology and talent.
- If you have used Instagram, you would know Instagram’s technology is not that ground breaking. Facebook is filled with talented people and it attracts lot of talented people from other pioneer companies like Apple, Google and Microsoft. So can’t these talented engineers recreate Instagram’s technology?
- Yes they could recreate the technology, but making users to switch is a long journey and Facebook has very little time before it goes to IPO.
Facebook wants Instagram’s user base
- Instagram is new kind of social networking site. You can follow people and other people can follow you and people can comment on your picture. Social networking for photo enthusiast mainly on mobile platform. More like Flickr but in mobile platform.
- One interesting fact here is, Instagram app lets you share this picture with Facebook and Twitter but not Google. If already Instagram lets people to share their picture in Facebook why waste money by buying it? Simple fact is either Instagram user share their picture in Facebook or not. If they already share it, then Facebook secured those users, it may look for ways to attract the people who don’t share their pictures in Facebook.
Stop Google acquiring Instagram.
- Google has failed many times in Social Networking with Orkut, Buzz, Wave. It’s again on the field with Google Plus. It desperately wants Google Plus to succeed. If Google acquired Instagram, it would have given huge boost to Google Plus.
- Google already owns biggest video sharing site. Instagram is YouTube for pictures. Remember how much Google spent on YouTube?
Is it worth 1 billion dollars?
I think price went up,
- Facebook is needs this acquisitions done before it goes IPO to boost its mobile presence.
- Because Facebook and Google are competing. The value really is not what Instagram is, but what Instagram could have been in the hands of competitor.
Let’s wait for couple of years and see how this acquisition affected Facebook and Google.
24-Apr-2012: Facebook reports, 901 million monthly active users and 500 million of them from mobile devices.