I’ve blogged many times before about the return of the seemingly distorted dotcom bubble deals – the eye-watering valuations of online businesses just because they are online – but of these, the acquisition of Instagram by Facebook for $1 Billion this week must surely top the lot. Instagram is a business which hasn’t yet reached its second birthday, hasn’t earned a single penny in revenues and employs just 13 people. But it must seem to Facebook that $1 Billion is a fair price to pay to get their hands on Instagram’s staggering popularity which has seen it gain 30 million registered members who use it on a regular basis – this includes the likes of Justin Beiber, Jessica Alba and even Barack Obama – and apparently a new member joins every 2 seconds. Between them, these members have posted a billion pictures on to the internet through the Instagram app.
Whilst I use Instagram myself, and I do think it’s pretty cool, it’s hardly a revolutionary bit of software. It let’s you apply the kind of funky retro filters to your photos, such as polaroids, sepia, duotones or saturated effects, which you can buy as Photoshop plugins in for a few quid or as apps for pennies. But it’s on your smartphone, it’s quick to use and really easy to create some very nice images which you can then share immediately online through platforms like Twitter and Facebook.
And I do get it;
I mean the reasons why Facebook would want to buy Instagram. Facebook now has a staggering 845 million users, many of whom use it largely because they like sharing photos with their friends, but Facebook hasn’t been doing so well on mobile largely due to Instagram. So it makes sense to swallow it up and I guess anything Facebook wants to buy will be that much more expensive because it’s them – in the same way any football player’s transfer fee doubles when Man City comes a knocking – but [and this needs to be read out loud in the style of Dr Evil for maximum impact] one billion dollars? Really?
Despite this massive number, opinion seems divided on the real value of the deal – is it evidence of another crazy dotcom bubble or is it as astute as Google’s acquisition of Youtube which cost them $1.6 Billion and seemed comparably over the top at the time, but they’ve got the biggest brand in online video and have made vast sums from advertising. Or is it part of some sinister plan by Facebook to collect more personal information to sell to advertisers. I don’t suppose Kevin Systrom, the 28 year co-founder who apparently stands to make $400 Million from the deal, is too worried either way.






