Facebook Buys Instagram

You might have heard by now that Facebook has acquired Instagram for nearly a billion dollars in cash and stock.  Incredible, isn’t it.

Astonishingly, Facebook users already upload an average of more than 250 million images daily, making it the most popular photo-sharing service on the Web. But it’s not the best by far and not the most mobile, which is Facebook’s biggest weakness. The company’s own mobile application is not as easy to use as Instagram, and sharing photos can be downright clunky.

Instagram lets people share photos they snap with their mobile devices. The app has filters that can make photos look as if they’ve been taken in the 1970s or on Polaroid cameras. Its users take photos of everything from their breakfast egg sandwiches to sunsets to the smiling faces of their girlfriends. Apple also picked it as the iPhone App of the Year in 2011. Don’t have an iPhone? Instagram for android is available http://instagr.am/android/ . The Android app added 1 million users on the first day alone. 

But it’s still leaving a lot of people are wondering why a 15-month-old photo-sharing app is worth so much money.

On the surface, that’s a huge sum for a tiny startup that has a handful of employees and no way to make money. But the real value is the community Instagram created in such a short time. It’s now one of the largest social networks with more than 30 million registered users. More than 1 billion photos have been downloaded, or about 5 million per day. The amount of engagement is impressive too: the photos generated more than 575 “likes” on Facebook per second, and more than 81 comments.

Instagram’s fans, brand recognition and its potential are difficult to put a price tag on. Yet Facebook has — and can afford it. The company is preparing for an initial public offering of stock that could value the company at as much as $100 billion in a few weeks.

Going by the price tag, Facebook is paying about $33 for each Instagram user. That’s a fraction of the $118 that Facebook investors will be paying per Facebook user if the company gets its expected $100 billion valuation after going public. By that math $1 billon doesn’t sound so crazy.

Mark Zuckerberg said Facebook plans to keep allowing people to post from Instagram to other social networks, including Twitter. Users will also be able to keep their Instagrams off of Facebook if they want to.

“We think the fact that Instagram is connected to other services beyond Facebook is an important part of the experience,” Zuckerberg said. There were some mutterings online about users leaving Instagram now that Facebook has bought it, though in reality Facebook will probably make it more popular.

There’s a good reason for Facebook to keep Instagram going as a separate product, even if Facebook integrates some of its technology into its own service so that mobile photo sharing becomes easier.

“Look at who Facebook is competing with — the Googles, Apples, Microsofts of the world. They have to build a strong brand and strong consumer platform,” Gartner analyst Brian Blau said. “Having a separate social network … is something they needed to do a long time ago.”

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About Nancy Bain

Our services include building optimized, functional and self managed WordPress websites, Nova Scotia social media training and consulting, interactive full screen high definition virtual tours with lead capture and print advertising. For most of our clients, we are their one stop solution for all things marketing, branding and small business development related.