The news that Facebook has bought Instagram makes perfect sense. Mobile is the future, and Facebook’s own app efforts have been the subject of much criticism. And more problematic, it remains a vulnerability going forward because of the lack of mobile revenue.
Instagram won’t provide any revenue, not any time soon. Maybe not ever. But it does provide a great mobile experience the meshes well with Facebook. You don’t share Instagram photos on an Instagram Web site, after all, you share them on the app, on Facebook and on Twitter.
But paying $1 billion? Well, that’s crazy money. Even if Instagram was raising money at a $500 million valuation last week, saying Instagram, after 18 months, is worth 1 percent of Facebook’s reported $100 billion valuation is simply insane. And this comes just a couple weeks after Zynga paid $180 million for OMGPOP just six weeks after that company released the white hot app Draw Something.
To put that $1 billion in perspective, Google paid $1.65 billion for YouTube in 2006. Yahoo reportedly paid $35 million for Flickr in 2005.
Clearly, the $1 billion was either a pre-emptive move, an offer Instagram couldn’t refuse, or there were multiple bidders in the game, driving up the price. I’ll be curious to see how much Facebook is required to disclose about the history of the transaction when it updates its S-1.
But I also wonder if this will now trigger a larger bidding war for the most popular mobile apps out there?
It would be tough for Apple to get into this game, despite its mind-boggling piles of cash. It would likely raise thorny anti-trust issues.
But it’s easy to imagine Google swooping in to grab some other photo sharing apps, like Hipstamatic, to give it some way to match Facebook on the photo-filtering features.
And extending beyond that, do each of these players need a social news app, like Flipboard? Twitter did buy social news app Summify earlier this year for an undisclosed sum.
Or what about a social music app, like Pandora or Spotify? The music ones become trickier, because of rights and royalties issues. But still, lots of interesting data tucked in there.
Finally, while it’s both mobile and Web, you have to wonder just what someone would pay for Pinterest at this point?
In any case, it’s easy to see how we get to an arms race in the world of mobile apps. Companies become paranoid that they’ll miss out, they pay too much to make sure a hot app doesn’t land in the lap of a competitor. This is going to make some young entrepreneurs very wealthy, some quick returns for lucky VCs. Whether it turns out to make an ounce of business sense, well, it’s the kind of question that tends not to get asked until much, much later.
10 comments
Facebook to buy Instagram for $1 billion – Reuters UK
[...] a change for Facebook, which has traditionally bought small companies as a means of hiring …With Facebook buying Instagram for $1 billion, is the mobile app bubble here?San Jose Mercury NewsSome Facebook Apps Are Still Too Greedy For User DataAllFacebookFacebook apps [...]
Apr 9, 2012
Getting started with Instagram – Fox News | News Room
[...] buys Instagram for $ 1 billionComputerworldBusinessWeek -Wall Street Journal -San Jose Mercury Newsall 1,032 news [...]
Apr 9, 2012
Facebook needs Instagram, but Instagram wins too – CNET
[...] the wildly popular mobile photo sharing app for smartphones. Quick analysis pegs this …With Facebook buying Instagram for $1 billion, is the mobile app bubble here?San Jose Mercury NewsSome Facebook Apps Are Still Too Greedy For User DataAllFacebookFacebook apps [...]
Apr 9, 2012
dobri bozhilov
Facebook demonstrates fake power with Instagram purchase…
http://dobrisratings.com/index.php?option=com_content&task=view&id=149532&Itemid=111
Apr 9, 2012
Facebook snaps up Instagram app for $1 billion – San Francisco Chronicle
[...] buys Instagram … but for what?CNETFacebook and photo-sharingThe Economist (blog)PCWorld -San Jose Mercury Newsall 2,003 news [...]
Apr 9, 2012
5 Instagram alternatives for those worried about Facebook privacy issues – Washington Post
[...] … but for what?CNETFacebook Makes Big Bet by Acquiring InstagramDaily BeastPCWorld -San Jose Mercury News -San Francisco Chronicleall 2,221 news [...]
Apr 10, 2012
Pourquoi Facebook a déboursé 1 milliard pour Instagram | news-infos.com
[...] un course à l’armement dans le monde des applications mobiles, constate ainsi désabusé le blogueur de Silicon Beat, Chris O’Brien. Les entreprises deviennent paranoïaques à l’idée de rater quelque chose. Elles paient [...]
Apr 10, 2012
Some guy
What is the little rectangular thingy on the finger at the top of the page?
Apr 13, 2012
Chris O'Brien
I believe it’s a chip of some kind.
Apr 13, 2012
Specs
Instagram has more than 1 million users and this apps is very useful in facebook yet facebook were not the first to recognize this idea were not able to realize how important this idea to their existing application. So buying it is no brainer for them and one billion dollars is just only a coin compared to what the effect the instagram will bring to the facebook users.
Apr 15, 2012