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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!
You might be surprised how much of a service economy is run by self-absorbed hipsters.
With young people it's paying extra for things like Apple hardware when equivalent or better alternatives are cheaper. Apple has built significant brand loyalty among these people because they know how to market. Facebook is like a well known brand name, except it's an even more efficient way to get lots of attention while doing nothing particularly significant.
WIth old people it's being waited on to feel served and important. They'd rather stand in line at a service counter even if what they want is trivial, even if it means waiting longer than it would take to do it themselves, even if they are able bodied and what they want done requires no skill. They seem uncomfortable dealing with younger folks as equals and feel a need to be in some kind of situation of authority, "customer" being the most readily accessible. They'll try to force waitstaff to listen to stories about their grandkids etc. because they assume random strangers give a damn, and in short they just love a captive audience not allowed to refuse.
Both are responsible for a large amount of business. Both are not being terribly rational. They are just catering to and trying to satisfy either the attention Daddy never gave them or the fact that they have no friends. You think the recession is bad, remove these elements and it'd be even worse but beware of the broken window fallacy.
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