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Facebook To Buy Instagram For $1 Billion
Dorduan writes with news that Facebook is buying Instagram, the company who makes the popular mobile photo-sharing app of the same name, for approximately $1 billion. Mark Zuckerberg wrote,
"... in order to do this well, we need to be mindful about keeping and building on Instagram's strengths and features rather than just trying to integrate everything into Facebook. That's why 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. We think the fact that Instagram is connected to other services beyond Facebook is an important part of the experience. We plan on keeping features like the ability to post to other social networks, the ability to not share your Instagrams on Facebook if you want, and the ability to have followers and follow people separately from your friends on Facebook."
Without disagreeing with the substance of your post ($1 billion does seem like a lot for what it is), in principle things like notoriety/brand recognition, patents, and existing user base all are worth money, much more than whatever time it would take for a competitor to build an identical system from scratch.
The application details are a formality. The 30+million users are the product.
Facebook is buying cattle fenced in by another app, and moving it within its world (where Google cannot reach :).
1990's and prior - you had to buy and read magazines to get your celeb news
21st century - celebs connect directly to fans via social networks
the owner of the platform that owns this will have a huge opportunity in marketing
look for pinterest to be bought next
There are so many reasons I avoid Apple products (#1 being, I don't actually NEED a graphic design/video editing/print layout computer or other iGadget) and this has just been added to the list right underneath the idolatry thing.
I have the hiccups.
Spoiler alert: All the platforms have their idiots.
1. Build a simple app.
2. Generate a substantial user base.
3. Make facebook feel threatened.
4. Profit!
No man is an island, But if you take a bunch of dead guys and tie them together, they make a pretty good raft.
I commonly see Android users who are genuinely offended that Google is releasing their apps for iOS as well. Yet a double standard is applied to iPhone users that they're the snobby ones.
Heck, Android users calling Apple part of a "Apple Cult of Personality" and "idiots" is a little snobby, don't you think?
Doesn't $33 per user seem a bit excessive to you?
"Social" is a tough game. By the time it's clear that a competing platform is a threat, they'll have their own established brand and overinflated stock price.
Presumably Facebook believe that a large number of their users use their accounts primarily for sharing photos with friends.If some other platform starts serving that need, they'll stop spending time on Facebook, and if the platform reaches critical mass, they'll start "dragging" other users over.
Remember that ad revenues go up as users spend more time on their site. If people are sharing and browsing photos somewhere else, they're spending less time on Facebook, even if they still have an account.
Thus there are two costs: the direct loss of ad revenue as people spend less time on Facebook, and the increased risk of a competitor gaining critical mass as people form networks outside of Facebook. It's safest to cull them while they are buds, but of course the start-ups know that, and demand a hugely inflated price.
So, 1 Instagram == 800 AOL Patents?
It has also been shown that bubbles appear even when market participants are well-capable of pricing assets correctly.
In other words, even if everyone knows its a bubble, they will propagate it anyway.
Even those who arrange and design shrubberies are under considerable economic stress at this period in history.