Facebook hasn’t been known for flashy acquisitions, but that changed yesterday when the social media giant purchased photo sharing site Instagram for $1 billion. There’s no doubt that Instagram, which allows users to apply various photo effects onto new or previously uploaded pictures, has exploded in popularity since its inception just under two years ago. But, the question still begs to be asked – why pay a staggering $1 billion for a company that brings in no revenue?
The idea of Facebook acquiring Instagram, regardless of price, makes sense. Though plenty share Instagram photos on Facebook, Instagram’s website was quickly building a following that was staying confined to the native website, and being shared on other social media sites like Tumblr or Twitter. The move allows Facebook to reassert its dominance over photo sharing, though Mark Zuckerberg says that Instagram will remain an independent brand, saying that, “…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” in a post on his Timeline to announce the deal. That’s an independent brand approaching 50 million users, a user base boosted by the recent release of an Instagram Android app.
Zuckerberg also made sure to mention that Facebook doesn’t intend on keeping Instagram all to itself, saying, “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.”
Zuckerberg seems keen on pointing out his intention to help Instagram grow, but a possible scenario would see the opposite. It’s easy to imagine that soon, Facebook users will be allowed to apply Instagram effects onto uploaded photos instantly, circumventing the Instagram site (and Facebook app) completely. That will be too convenient for many to avoid. Droves of people have taken to Twitter, lambasting the move and threatening to delete their Instagram accounts. Some might not like Instagram going mainstream, but they call it the mainstream for a reason. The move, eventually, will result in new features that will please most Facebook users and maybe even draw in some new ones, and that’s all that really matters when it comes to a deal like this.
…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.
Still, $1 billion is an awfully steep price. Zuckerberg claims that purchases like this will be an exception, rather than a rule going forward, saying, “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. But providing the best photo sharing experience is one reason why so many people love Facebook and we knew it would be worth bringing these two companies together.”
What we can probably take away from this move, and the stunning price tag attached to it, is that Facebook can and will pay just about whatever they want when it comes to reining in a competitor or making a move that will foster growth in some new way. Facebook’s growth has long been sustained by the company itself, and that won’t likely change. That said, if an opportunity like this arises again in the future, it’s probably safe to say Zuckerberg won’t think twice about pulling the trigger.
As for Instagram itself, a few people have just become very rich. Instagram, until now, was made up of nine people working out of a conference room. Those people, and plenty of investors, are much wealthier today. That includes Instagram CEO Kevin Systrom, whose 40 percent stake in the company leaves him with a net worth exceeding $400 million. Not bad for a couple years’ work.
Via ABC News