Slashdot Mirror
Forbes Likens Instagram Purchase To Myspace Deal
theodp writes "It's not that Chunka Mui isn't impressed by the smarts of Instagram CEO and Forbes cover boy Kevin Systrom. Still, Mui can't help but ask, 'How Long Before Facebook Writes Off Its $1B Purchase of Instagram?' While pundits and analysts have almost universally praised Facebook's acquisition of Instagram, Mui is less-than-impressed by Instagram's 80 million unmonetized mobile users. 'My prediction,' writes Mui, 'is that we'll look back on the acquisition as a bust — much in the same way we now view News Corp.'s purchase of Myspace, AOL's purchase of Bebo, and Excite@Home's purchase of Blue Mountain Arts.' Ouch. Mui notes that according to a recent SEC filing, Facebook could ditch the deal by paying a $200 million fee if regulators block the merger or if Facebook terminates the agreement after Dec. 10, 2012."
To me it's more like Facebook is grasping for relevance by purchasing Instagram. Facebook will fade out while Instagram will continue to gain popularity.
Clearly the acquisition of Instagram was a defensive move in the social networking space - it was starting to build a market that would otherwise chip away at Facebook - and you'd think they learnt their lesson from letting Twitter grow into a competitor
So, of course, you'd expect it to get written-down as just enough functionality is incorporated into Facebook to ensure another competitor doesn't pop up in the same "social photo" space. But also expect them to let it die a slow death (rather than shut it down) to maximise the defensive value of the acquisition.
I said this back when the deal happened.
$1B for a service used by self-absorbed 'hipsters' to take photos of food and who pay nothing for it? Nuts!
In what universe was this considered a good deal? How on earth does a company that lets users take chintzy photos with a fake aging filter worth 1000 million dollars?
There's nothing that makes Instagram a natural monopoly : at least with facebook itself, the vast userbase it has makes it a de-facto monopoly. (just like there's only space in front of your house for one power company and one set of roads, there's only time for you to put inane status updates on one social networking site).
And, worse still, Facebook doesn't have the deep pool of genius level talent like google, so it's entirely possible that Facebook will not STAY on top. But at least it has most of the user base for social networking, and people use it to get stuff done. Instagrams an internet fad that gives the product away for free.
Shit...for a cool 1000 million, facebook didn't even get a deep talent pool of genius level software engineers. They bought themselves a whopping 10 or so employees. No matter how skilled, 10 folks isn't worth that kind of scratch.
While pundits and analysts have almost universally praised Facebook's acquisition of Instagram.
Which pundits and analysts exactly? Because all I ever heard was how utterly insane the acquisition was.
Slashdot social media options: AIM, ICQ, Yahoo, Jabber and Mobile Text. Why no MySpace?
Well I think we all know that a making the cover of a business magazine is pretty much the guaranteed path to a bright future in the internet startup world.
What political party do you join when you don't like Bible-thumpers *or* hippies?
Apparently, "number of users" is now more important a metric than how many of those users are giving you money, or how much.
Just because they have 80 million users means NOTHING. There are at least 60m estimated users of Linux (if not a lot more) - it doesn't mean that ANY of them are generating any money for Linus et al.
If you have ONE user who's paying you money for your service, that's more valuable than 80m who aren't. Sure, you can get some ad revenue off the 80m if you play it right but that's dropping all the time, costs a lot to administer and doesn't provide massive amounts of profit direct to you. And the slightest change means that those 80m people - who have NOTHING invested in your business - will just move elsewhere. The same as MySpace users suddenly flocked elsewhere.
If they were paying customers, they would have a say, they would have a reason to stay, they would have a reason to explain to you what they didn't like and where/how you're better than the competition. If they're unpaying, they don't. The second you break the site for them (e.g. even putting an ad up in some cases), the second you lose all those users.
Users means NOTHING. Revenue means something. If your not monetizing your users, then you're not running a business and, thus, your business value is zero. It's like running a "free-to-play" game. Of COURSE you have 10m users. It's a free game. But if you can't turn X % of those users into paying customers, you're just pissing away development time and money.
It's like saying that when you gave out free samples of your cologne, a hundred thousand people asked for one. But when you charge £1 a bottle, you WILL NOT make hundred thousand pounds. Of course you won't. Anyone that thinks so is an idiot. However, if you said you had a cologne where out of the hundred thousand people, thousands of them paid you for it because it was so good, then you'd have a viable business. But still, when you start charging, you won't necessarily sell a bottle for every person who expressed an interest.
Any sale, on any stock market, that includes the figure of how many users - without context of how many were paying and/or how much profit they make per user - is worthless and only a sign that someone, somewhere is going to make a quick buck from all the idiots trying to buy the IPO by selling out extremely early before the ship sinks.
Users do not matter. I can have a hundred thousand visitors to my website, or ten thousand registered accounts. It does not mean that I would ever get a SINGLE paying customer at all, even if I changed nothing else.
The following explains what the popular social media currently are and what they do differently: http://www.designverb.com/wp-content/images/2012/04/social_media_donut.jpg
Maybe a company like Coca Cola pays Instagram to hold a contest for best Coke brand photo? The user gets a prize of $25,000. I bet people will use Instagram over email. Users pay nothing,
"I don't think it's selfish, to eat defenseless shellfish." -NOFX
I don't know what they're talking about, MySpace was already long dead when News Corp bought them (where dead is defined as no longer the place where everyone and their mother's cousin creates an account). I was laughing at them the day they bought it, no need for hindsight on this one!
I'm not a bird, I'm a super-advanced flying stealth dinosaur!