I recently learned what Instagram was when a friend took a picture of me and then showed me the resulting photo that looked a whole lot different from what he had taken a picture of. Maybe I am behind the times, but I really had no prior knowledge of this particular photo sharing app. Regardless, it seemed interesting, but I didn’t really give it a second thought.
Turns out Mark Zuckerberg did, though. He gave it enough thought to decide to fork over $1 billion – yep, you read that right – to acquire the company, in a deal announced Monday. Not a bad profit for a 551-day-old company of 10 employees.
Considering the deal put a higher value on Instagram than companies like The New York Times, Barnes and Noble and Office Depot, the natural question to ask was whether Facebook overpaid. Even though Zuckerberg hasn’t made many bad decisions since getting dumped by Erika Albright, it’s a valid question.
But step back and consider the state of social media and the deal doesn’t look as outrageous. People are becoming more and more interested in sharing every single detail of their lives with the world. There is very little private information anymore, and that’s how much of this consumer generation wants it. Social networking can no longer be laughed off as a passing trend. At the heart of the social networking experience are photographs. They make up the most important part of the Facebook experience, something the company no doubt understands. Photo sharing innovation helps to fulfill those growing desires of the consumer.
Since photo taking and social media has extended to mobile phones, it is vital that these companies supply as many networking opportunities to the phone as possible. The future of social media is in mobile devices as people continue to transition to smart phones. With that comes major money-making opportunity for the company that can best bring photo sharing to the mobile device. Consider all of this and the importance of Instagram begins to come into focus.
So Facebook sees the Instagram Android app receive 1 million downloads in its first day of availability. Then it receives $50 million in funding from Venture Capital giants like Sequoia Capital – remember, all of this was done with 10 employees – and suddenly it becomes possible that we might be seeing the future of social media and photo sharing. At the very least, we have on our hands what some experts are calling one of the most efficient companies currently operating. Rather than allow somebody else to swoop in and acquire the next big thing in mobile photo sharing, Zuckerberg takes the offensive and makes the move himself. It’s bold, no doubt about it. But if you have the means to do it – and Facebook certainly does as they prepare to take their own company public, adding yet another revenue stream – why not trust your instinct and take the chance?
With one move he eliminates a possible competitor and adds to his arsenal in the ever-evolving world of social media. There is always risk in such deals. But this one seems to be worth it. Time will tell, but it appears to me that Facebook is staying ahead of the curve with this acquisition.