10 April 2012

GigaOM: “Here is why Facebook bought Instagram”

My translation: Facebook was scared shitless and knew that for first time in its life it arguably had a competitor that could not only eat its lunch, but also destroy its future prospects. Why? Because Facebook is essentially about photos, and Instagram had found and attacked Facebook’s achilles heel — mobile photo sharing. Om Malik

Hmm, threatened by a company with no revenues and no plans whatsoever for a business model?! Oh, wait, maybe that was the business model: selling to the highest bidder! Of all the hundreds and thousands of new products launched each year, let’s say, for the sake of simplicity, 90% fail miserably, 9% get acquired by a handful of tech giants and 1% go on to become the next big thing – for a while at least. With so many users, Instagram was already past the point of failure, but I guess they had no real ambition to become more than that. The whole Android launch just days before this news is in retrospect just another move in the negotiation game: Instagram wanted to prove they are hot on a second platform in order to get a better deal – which they have. So no, there was no real danger for Facebook – other than competition like or buying them. I am inclined to think the acquisition is less about talent or users, and more a power move from Facebook, a sign to both app developers and Google: we can and will compete for startups, we have the money to do it.

There is another aspect to this: the public perception of the two communities. Instagram is – or shall I say used to be? – perceived as an exclusivist app, a closed circle of Apple fans and photo enthusiasts. This likely fueled the insane growth on Android, the feeling they were finally allowed in this exclusivist community. on the other hand is the very opposite of exclusivist: like it or not, you have to be there, because everyone else is already on Facebook. Combined with the poor record on privacy, this could spell bad news for Instagram, regardless of the stated intentions to keep it relatively independent. The original, Apple-centric, community already complained about the flood of Android users, being tied to Facebook just makes things worse. In the long run, I don’t see this working out very well – for what remains of Instagram at least…

Troublingly, my best theory was that Mark Zuckerberg stood to inherit a trillion dollars from his eccentric uncle, but only if he could spend a billion dollars in less than an hour without acquiring any tangible property. Andy Ihnatko

This explanation works too.

Just to be clear: I never used Instagram on the iPhone and I don’t see any reason to, even less now.

Update: Reports are coming in that the deal was finalized in record time, just under two days. Which, I guess, supports both possibilities: that Facebook was scared, but at the same time that Instagram was just waiting for an offer like this to come up.

2 comments:

  1. Instagram is just another overvalued tech company purchased with Monopoly money. This will add to the drama when Facebook comes crashing down to Earth in a year or so.

    http://mankabros.com/blogs/onmedea/2012/01/27/facebook-and-the-disappearing-valuation/

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    1. I agree, most of the tech companies are overvalued. I fail to see how these billions Facebook is supposed to be worth would ever translate into tangible goods or services. So many money just for targeting ads?!

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