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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."
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.
I see it the complete opposite. Instagram was last month's "words with friends" or "draw something" or "pintrist" or whatever. It was the obsession-of-the-moment for the barely-computer-literate, and from a completely anecdotal point of view, I've seen its popularity drop off tremendously in just the past few weeks. I used to see it all over my wife's tumblr feed and my facebook, and now it's showing up way less often. the new obession-of-the-moment are these creepy animated gifs apparently, that only show like 12 frames at a time of a movie or tv show. I don't get it, but then, I guess it's not "for me".
Facebook on the other hand, for all the complaints it always garners, appears to be going as strong as it ever was, at least as far as I can tell. If there's something new and more popular on the horizon for all the tweens and children, I haven't heard about it yet. That said, FB seems to be constantly slightly reinventing itself successfully every 6 to 12 months, adding some new feature or some new integration to keep its users interested for the next little bit. I don't know if it's Zuckerberg or his underlings doing it, but there's a pretty intelligent hand directing that company (well, perhaps not their mergers and aquisitions dept). I don't see FB going anywhere for a good while yet.
I'm not saying I'd buy stock in it of course.
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?
creepy animated gifs apparently, that only show like 12 frames at a time of a movie or tv show
Well, think of it like a fake ageing filter for the purely digital realm. You take a perfectly good image sequence from a movie then "age" it to make it look like it would in 1996, by using a 256 entry pallette and a limited number of frames.
In that way, it's just like the instagram it replaces.
SJW n. One who posts facts.
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.
This is somewhat insightful but takes more explanation.
I'm technically a "user" of linkedin. I haven't logged in for at least a year or two. Its impossible for linkedin to monetize me. I don't look at their site and incoming emails from them go to the spam folder. The same thing happened to me with facebook. Initial rush of friending and impressing people I don't know or care about. Then boredom sets in. Finally I stop logging in. At this point FB can no longer monetize me. Eventually I deleted my FB not because I was using it and deleting was making some kind of political or privacy point, but because I was no longer using it so it made no point to keep it around any longer as a insecurity vector etc.
On the other hand a pic sharing site only exists as its used. Unlike linkedin, I can't say I'm a instagram user unless I'm logging in and having advertisements shoved in my face (well, if I haven't been using an ad blocker since the 00s, anyway). Like reddit or 4chan or /. or a blog, I guess, all the viewers are viewers, not just dead unused accounts.
Or the medium length version is Linkedin / FB / G+ can have millions of "users" who never get spammed because they never log in, but ALL instagram viewers inherently are spamable.
Its kind of like how a chicken has a distant relationship with my breakfast, but a pig is 100% committed to my breakfast. The chicken can always lay another egg, or not, whatever. The pig however is fully and permanently and forever involved with my bacon.
"Science flies us to the moon. Religion flies us into buildings." - Victor Stenger
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
I'm not sure your (or my) Facebook use is entirely typical. At least their last two quarterly reports suggest that they're still increasing monthly active users by the truckload. That's not just new sign-ups. So overvalued? At like a 115 P/E, absolutely, unless they can find a good way to start making real money in mobile. I don't see the whole service falling off the MySpace cliff of irrelevance any time soon, though.
Instagram I never really understood. I suppose facebook could use it to boost their oft-maligned mobile app and roll the addicted users into the fold. Maybe. I don't know if it could pay off to the tune of a billion dollars though. At least it puts all that content inside their gates, for whatever that's worth.
http://cinemagr.am/
If Instagram had three jump-the-shark moments, the first was version 2 that removed and altered some filters. The second was the android version that brought in lots of new users and lots of mediocre cameras. The third was the facebook purchase.
Do you even lift?
These aren't the 'roids you're looking for.
Vat grown bacon is just around the corner. Pigs are expendable.
A buddy of mine works as a social media consultant. He went to a high school and asked the students which social networks they used. Tumblr and Twitter were the most popular and most of them no longer used Facebook.
Facebook's stock is down. Several major companies have declared they're abandoning Facebook advertising. One company claims they have evidence that most clicks of Facebook ads were by bots and that Facebook refused to allow them to change the name of their page unless they upped their advertising by $2,000 a month.
Last year Zynga was the popular company that everyone declared the future. They were going to surpass EA, except now they're in the toilet. Casual social games was the second most popular activity on the internet last year (behind checking email) and it has already given way to mobile gaming. Zynga's success fed Facebook's success in generating tons of new pageviews. As social games are declining, so are Facebook pageviews.
Facebook is not as strong today as it was last year, and I doubt it will always remain the most popular social network.
http://blindscribblings.com - Tasty pop-culture in conceptual fashion.