Why Did Facebook Pay $1,000,000,000 for Instagram?
Instagram is now a proud member of the Facebook family. This acquisition is momentous for Facebook because it’s the first time they’ve acquired a company with this scale. In Mark Zuckerberg’s words:
This is an important milestone for Facebook because it’s the first time we’ve ever acquired a product and company with so many users. We don’t plan on doing many more of these, if any at all.
Let’s address the elephant in the room. Why did Facebook pay a “you know what’s cool?” billion dollars for a simple photo sharing utility that they could have duplicated in their sleep? Answers:
- Instagram is a viable competitor. Facebook should rightly worry about any company that’s stealing their marketshare, particularly when it comes to photos. It’s sometimes better to overpay now than watch them suck you dry later. Remember: Yahoo had a chance to buy Facebook in the mid-2000s.
- Instagram users provide remarkably valuable data. Facebook uses data for ad targeting, so they just purchased a pipeline of geolocation and social graph data.
- Instagram’s team is, evidently, remarkable. They have 9 employees and just sold to Facebook for $1 billion. You kinda want those guys in your organization.
Now here’s an interesting question: will this hurt Instagram’s prospects of becoming the default photo sharing application, as the founder said is the goal? Or will it help?
- Hurt: Google and Apple don’t love Facebook. Google and Apple control the two largest mobile operating systems.
- Help: Facebook’s massive scale might help them convince international carriers and Android handset manufacturers to pre-load it on all phones.