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Forbes Likens Instagram Purchase To Myspace Deal

Unknown Lamer posted about a year and a half ago | from the monetizing-hipsters dept.

Facebook 105

theodp writes "It's not that Chunka Mui isn't impressed by the smarts of Instagram CEO and Forbes cover boy Kevin Systrom. Still, Mui can't help but ask, 'How Long Before Facebook Writes Off Its $1B Purchase of Instagram?' While pundits and analysts have almost universally praised Facebook's acquisition of Instagram, Mui is less-than-impressed by Instagram's 80 million unmonetized mobile users. 'My prediction,' writes Mui, 'is that we'll look back on the acquisition as a bust — much in the same way we now view News Corp.'s purchase of Myspace, AOL's purchase of Bebo, and Excite@Home's purchase of Blue Mountain Arts.' Ouch. Mui notes that according to a recent SEC filing, Facebook could ditch the deal by paying a $200 million fee if regulators block the merger or if Facebook terminates the agreement after Dec. 10, 2012."

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105 comments

Nope. (3, Insightful)

niix (839104) | about a year and a half ago | (#40916983)

To me it's more like Facebook is grasping for relevance by purchasing Instagram. Facebook will fade out while Instagram will continue to gain popularity.

Re:Nope. (-1)

Anonymous Coward | about a year and a half ago | (#40917099)

I just love it when there's a crime on the news and they tiptoe around it.. carefully don't mention it... it was a violent crime... they pretend there is no connection at all and never could be ... then they finally show the perp and, shock and surprise! He's black! Wow didn't see that one coming!!

Re:Nope. (-1)

Anonymous Coward | about a year and a half ago | (#40917553)

Me? I love it when George Zimmerman is a "white hispanic" but Elizabeth Warren is a "Cherokee".

Re:Nope. (-1)

Anonymous Coward | about a year and a half ago | (#40917659)

Me? I love it when George Zimmerman is a "white hispanic" but Elizabeth Warren is a "Cherokee".

Well sure. the ultra group-identity sensitive liberal media has a clear agenda. more than one of them in fact.

Their agenda concerning race is that whites are evil, and every non-white person is a victim of whites. Even when all their problems are solely due to their bad decision making.

Another agenda is that adults who make bad decisions are somehow not responsible when this doesn't work out for them. It's somebody else's fault. Always somebody else's fault. You are always a victim.

Another agenda is that guns are EVIL. The GUN is evil, not the psychopath who uses it to shoot innocents. The GUN is evil, so when a gun is used for something good like stopping a crime without firing a shot, they are so careful to never mention this. You only ever find out this happened in alternative media. The TV talking heads say something generic like "the perpetrator was subdued until police arrived". They are so, so very careful not to mention that a citizen with a legal conceal-carry permit used it to stop a crime without having to hurt anybody, that the mere presence of a gun turned the tables on the criminal. This happens quite a bit, but you would get the impression it never, ever happens.

Another agenda is that Barack gets a pass on things that they'd grill a Republican president over. You know I really don't care which way this goes - give them all a pass because we have real problems to worry about bigger than some gaffe he made, or grill all of them equally, but it's one or the other folks. Anything else is blatant favoritism and bias.

The media is not your friend. The media sucks. It's not that they fail. They do it on purpose, systematically. It's like their religion. They believe it's for some kind of greater good or whatever to be this way. It doesn't require every reporter and anchor to agree, just a few at the top to tell them what they will cover. The media is the biggest reason why average americans are so fat and stupid and uninformed. The media is deliberately given at about a sixth grade reading level because heaven forbid anyone learned something new. It's not intended to stimulate intellect and cause real debate. It's intended to spread a carefully pre-crafted message.

Re:Nope. (4, Interesting)

Skarecrow77 (1714214) | about a year and a half ago | (#40917127)

I see it the complete opposite. Instagram was last month's "words with friends" or "draw something" or "pintrist" or whatever. It was the obsession-of-the-moment for the barely-computer-literate, and from a completely anecdotal point of view, I've seen its popularity drop off tremendously in just the past few weeks. I used to see it all over my wife's tumblr feed and my facebook, and now it's showing up way less often. the new obession-of-the-moment are these creepy animated gifs apparently, that only show like 12 frames at a time of a movie or tv show. I don't get it, but then, I guess it's not "for me".

Facebook on the other hand, for all the complaints it always garners, appears to be going as strong as it ever was, at least as far as I can tell. If there's something new and more popular on the horizon for all the tweens and children, I haven't heard about it yet. That said, FB seems to be constantly slightly reinventing itself successfully every 6 to 12 months, adding some new feature or some new integration to keep its users interested for the next little bit. I don't know if it's Zuckerberg or his underlings doing it, but there's a pretty intelligent hand directing that company (well, perhaps not their mergers and aquisitions dept). I don't see FB going anywhere for a good while yet.

I'm not saying I'd buy stock in it of course.

Re:Nope. (4, Insightful)

serviscope_minor (664417) | about a year and a half ago | (#40917177)

creepy animated gifs apparently, that only show like 12 frames at a time of a movie or tv show

Well, think of it like a fake ageing filter for the purely digital realm. You take a perfectly good image sequence from a movie then "age" it to make it look like it would in 1996, by using a 256 entry pallette and a limited number of frames.

In that way, it's just like the instagram it replaces.

Re:Nope. (4, Informative)

larry bagina (561269) | about a year and a half ago | (#40917667)

If we don't, remember me [tumblr.com] has been around since late 2010.

If Instagram had three jump-the-shark moments, the first was version 2 that removed and altered some filters. The second was the android version that brought in lots of new users and lots of mediocre cameras. The third was the facebook purchase.

Re:Nope. (1)

AbRASiON (589899) | about a year and a half ago | (#40924525)

You're one of *THOSE* morons are you?
The "ewwwwwwwww Android" crowd who talk about their ultra elite Apple phones and how Android phones are for poor people? We all saw the idiot, elitist twitter posts - you people are embarassingly stupid.
https://www.google.com.au/search?q=ewwww%20android%20twitter%20instagram&hl=en&meta= [google.com.au]

Guess what? The iphone 3 had an AWFUL bloody camera, the 3GS was somewhat better and the iphone 4 had that ridiculous green blotch in the middle.
True definition of idiot Apple users, no wonder there's a backlash against that moronic cult / culture forming.

Re:Nope. (0)

Anonymous Coward | about a year and a half ago | (#40918171)

I thought it was pretty obvious that buying instagram was a pure "screw you" to investors. Zuk doesn't need or want your money.

Re:Nope. (4, Interesting)

Enderandrew (866215) | about a year and a half ago | (#40918281)

A buddy of mine works as a social media consultant. He went to a high school and asked the students which social networks they used. Tumblr and Twitter were the most popular and most of them no longer used Facebook.

Facebook's stock is down. Several major companies have declared they're abandoning Facebook advertising. One company claims they have evidence that most clicks of Facebook ads were by bots and that Facebook refused to allow them to change the name of their page unless they upped their advertising by $2,000 a month.

Last year Zynga was the popular company that everyone declared the future. They were going to surpass EA, except now they're in the toilet. Casual social games was the second most popular activity on the internet last year (behind checking email) and it has already given way to mobile gaming. Zynga's success fed Facebook's success in generating tons of new pageviews. As social games are declining, so are Facebook pageviews.

Facebook is not as strong today as it was last year, and I doubt it will always remain the most popular social network.

Re:Nope. (0)

Anonymous Coward | about a year and a half ago | (#40918533)

I have a 14-year old niece who, I was surprised to hear, says she and her friends are all on Twitter, and do not use Facebook.

I was surprised.

Re:Nope. (1)

Skarecrow77 (1714214) | about a year and a half ago | (#40919007)

To be fair, I don't have any 14-year-old friends, so I'll have to take your neice's word for it.

I wonder what it says about a generation however that prefers to communicate with each other in 140 word snippets?

also, I wonder if facebook's age "requirement" affects the distribution curve at all?

Re:Nope. (0)

Anonymous Coward | about a year and a half ago | (#40921063)

Zynga's in the toilet? Do you have a link to back this up? I don't want to get my hopes up.

Re:Nope. (1)

ArhcAngel (247594) | about a year and a half ago | (#40921661)

They've always been in the toilet. It's just that they had lots of money in the toilet with them. Gives a new mental image to dirty money.....

Re:Nope. (1)

ArhcAngel (247594) | about a year and a half ago | (#40921587)

Instagram was last month's "words with friends" or "draw something" or "pintrist" or whatever

Yeah everyone I know if moving from Pintrist to Manteresting [manteresting.com]

Re:Nope. (4, Interesting)

vlm (69642) | about a year and a half ago | (#40917221)

To me it's more like Facebook is grasping for relevance by purchasing Instagram. Facebook will fade out while Instagram will continue to gain popularity.

This is somewhat insightful but takes more explanation.

I'm technically a "user" of linkedin. I haven't logged in for at least a year or two. Its impossible for linkedin to monetize me. I don't look at their site and incoming emails from them go to the spam folder. The same thing happened to me with facebook. Initial rush of friending and impressing people I don't know or care about. Then boredom sets in. Finally I stop logging in. At this point FB can no longer monetize me. Eventually I deleted my FB not because I was using it and deleting was making some kind of political or privacy point, but because I was no longer using it so it made no point to keep it around any longer as a insecurity vector etc.

On the other hand a pic sharing site only exists as its used. Unlike linkedin, I can't say I'm a instagram user unless I'm logging in and having advertisements shoved in my face (well, if I haven't been using an ad blocker since the 00s, anyway). Like reddit or 4chan or /. or a blog, I guess, all the viewers are viewers, not just dead unused accounts.

Or the medium length version is Linkedin / FB / G+ can have millions of "users" who never get spammed because they never log in, but ALL instagram viewers inherently are spamable.

Its kind of like how a chicken has a distant relationship with my breakfast, but a pig is 100% committed to my breakfast. The chicken can always lay another egg, or not, whatever. The pig however is fully and permanently and forever involved with my bacon.

Re:Nope. (1)

Anonymous Coward | about a year and a half ago | (#40917293)

Oh no. Not that #@$! chicken and pig analogy again.

I can't tell you how sick I am of hearing that being repeated as if it a were fresh and new insight every time.

So ... you are saying you want a car analogy? (1)

Anonymous Coward | about a year and a half ago | (#40918041)

So ... you are saying you want a car analogy?

Re:Nope. (0)

Anonymous Coward | about a year and a half ago | (#40918535)

The first time I heard it was from my boss. He was telling us that we should commit like that. I asked him if he was telling us to give our lives to the company, everything else be dammed (family, personal life, activities out of work). He hasn't made that analogy since then.

Re:Nope. (3, Insightful)

SomePgmr (2021234) | about a year and a half ago | (#40917349)

I'm not sure your (or my) Facebook use is entirely typical. At least their last two quarterly reports suggest that they're still increasing monthly active users by the truckload. That's not just new sign-ups. So overvalued? At like a 115 P/E, absolutely, unless they can find a good way to start making real money in mobile. I don't see the whole service falling off the MySpace cliff of irrelevance any time soon, though.

Instagram I never really understood. I suppose facebook could use it to boost their oft-maligned mobile app and roll the addicted users into the fold. Maybe. I don't know if it could pay off to the tune of a billion dollars though. At least it puts all that content inside their gates, for whatever that's worth.

Re:Nope. (2)

ArhcAngel (247594) | about a year and a half ago | (#40921735)

Perhaps you weren't aware of the latest numbers? [cbsnews.com]

For a site that lives and dies by its unique visitors a 4.8 % drop in 6 months could be...unsettling.

Re:Nope. (1)

SomePgmr (2021234) | about a year and a half ago | (#40922449)

Interesting that comScore says they lost uniques while their quarterly report to US financial regulators says:

"Monthly active users climbed 29% from a year ago at 955 million and daily active users rose 32% to 552 million. Mobile monthly active users were 543 million, up 67%."

There's more in the report broken down by quarters, but I'd say there's a disconnect in there somewhere.

Re:Nope. (2)

bickerdyke (670000) | about a year and a half ago | (#40917365)

Linkedin DOES make money from your account. Not your money, but the money of headhunters looking for job candidates. And they couldn't do that without user profiles, in use or not.

Re:Nope. (0)

Anonymous Coward | about a year and a half ago | (#40917749)

Facebook and Linkedin just "monetize" you as a product to others (even your deleted account, I'd surmise ...)

You're part of the value chain whether you participate or not. Welcome to the strange new economy ....

Re:Nope. (1)

styrotech (136124) | about a year and a half ago | (#40923785)

Its kind of like how a chicken has a distant relationship with my breakfast, but a pig is 100% committed to my breakfast.

You eat a whole pig for breakfast?!?

I would've thought that the pig was at most a few percent committed to your breakfast.

Re:Nope. (2)

ceoyoyo (59147) | about a year and a half ago | (#40917395)

Instagram is another example of something that is so absolutely trivial to code that the second they try to monetize it users will abandon it in droves for it's ad free replacement.

Facebook itself is kind of like that, except there's actually a network effect to keep people on it.

Not supposed to make money (5, Insightful)

mister2au (1707664) | about a year and a half ago | (#40916991)

Clearly the acquisition of Instagram was a defensive move in the social networking space - it was starting to build a market that would otherwise chip away at Facebook - and you'd think they learnt their lesson from letting Twitter grow into a competitor

So, of course, you'd expect it to get written-down as just enough functionality is incorporated into Facebook to ensure another competitor doesn't pop up in the same "social photo" space. But also expect them to let it die a slow death (rather than shut it down) to maximise the defensive value of the acquisition.

Re:Not supposed to make money (1)

Anonymous Coward | about a year and a half ago | (#40917095)

Except it's not really a market. An easy way to send pictures is nice but simple to copy, and users can go somewhere else on a whim.

Re:Not supposed to make money (2)

crazyjj (2598719) | about a year and a half ago | (#40917223)

Hah! Like they haven't already patented "a method of sending a digital photograph over the internet."

Re:Not supposed to make money (2)

mister2au (1707664) | about a year and a half ago | (#40917227)

Might be simple and easy to replicate but http://en.wikipedia.org/wiki/First-mover_advantage [wikipedia.org] is important

The marginal benefits of switching to an equivalent is always small for such a simple product and being a mass market social media product dictates that people will gravitate to the market leaders - that is, little point in joining a social platform is no-one else is there

So that limits Instagram competitors to:
- niche "photo" markets such as where Flickr is now placed
- disruptive "photo" products like Pinterest has done with a different take on "photo sharing"

Re:Not supposed to make money (1)

ceoyoyo (59147) | about a year and a half ago | (#40917419)

Except that Instagram posts on Facebook, and so can any other app. Nobody cares if my chic artificially aged photo was posted with Instagram or Fastergram or AAAAFastestGram. I don't know any Instagram users, but Facebook itself must be weakening the community lock in of it.

Re:Not supposed to make money (1)

mister2au (1707664) | about a year and a half ago | (#40917725)

Are you aware that Instagram also had its own networking aspects away from Facebook?

In the same way you tweet to Facebook but Twitter has its own standalone network as well.

Re:Not supposed to make money (1)

ceoyoyo (59147) | about a year and a half ago | (#40917831)

Yes, I am. My point is that Instagram's community is weakened because you can see people's pictures on Facebook. You don't HAVE to use Instagram.

Re:Not supposed to make money (2)

bickerdyke (670000) | about a year and a half ago | (#40917439)

"First-mover-advantage" for sending photos would have been a valid point for email, but not for instagramm. That goes to show that we don't have a traditional market here. Somehow Instagram was successfull DESPITE not offering any added value.

Re:Not supposed to make money (2)

mister2au (1707664) | about a year and a half ago | (#40917637)

Agreed but Instagram's market is not sending photos - email, facebook and phone messaging did that just fine - that is just a commodity market now (every smartphone and $50 camera can do that) with little differentiation other than scope of recipients.

The Instagram market is around the filters and allowing people to express themselves via that, rather than just 'capturing' the moment. The sharing is secondary in this context.

Re:Not supposed to make money (1)

lookatmyhorse (2566527) | about a year and a half ago | (#40917257)

But then, would Instagram accept to close the deal for less than $1B? Let's say, $500M, $100M..?

It was STOCK PRICE pumping (0)

Anonymous Coward | about a year and a half ago | (#40918555)

The deal was mostly done in Facebook shares, not cash. Instagram was only pretend $1 billion, not real $1 billion. They pretended FB shares were worth that, Facebook got the fake third party confirmation of its ludicrously high IPO value, just before its IPO. The system is known as a mock auction, where a vested third party gives a false indication of value in the thing being sold.

SEC is a joke.

Like any sane person... (3, Funny)

Anonymous Coward | about a year and a half ago | (#40917011)

I said this back when the deal happened.

$1B for a service used by self-absorbed 'hipsters' to take photos of food and who pay nothing for it? Nuts!

Re:Like any sane person... (5, Interesting)

Anonymous Coward | about a year and a half ago | (#40917209)

I said this back when the deal happened.

$1B for a service used by self-absorbed 'hipsters' to take photos of food and who pay nothing for it? Nuts!

You might be surprised how much of a service economy is run by self-absorbed hipsters.

With young people it's paying extra for things like Apple hardware when equivalent or better alternatives are cheaper. Apple has built significant brand loyalty among these people because they know how to market. Facebook is like a well known brand name, except it's an even more efficient way to get lots of attention while doing nothing particularly significant.

WIth old people it's being waited on to feel served and important. They'd rather stand in line at a service counter even if what they want is trivial, even if it means waiting longer than it would take to do it themselves, even if they are able bodied and what they want done requires no skill. They seem uncomfortable dealing with younger folks as equals and feel a need to be in some kind of situation of authority, "customer" being the most readily accessible. They'll try to force waitstaff to listen to stories about their grandkids etc. because they assume random strangers give a damn, and in short they just love a captive audience not allowed to refuse.

Both are responsible for a large amount of business. Both are not being terribly rational. They are just catering to and trying to satisfy either the attention Daddy never gave them or the fact that they have no friends. You think the recession is bad, remove these elements and it'd be even worse but beware of the broken window fallacy.

Re:Like any sane person... (4, Interesting)

vlm (69642) | about a year and a half ago | (#40917313)

Very good post AC you should post under your own name to get modded up.

Your analysis of the customers is spot on with the exception that both your example have immense capital investment to keep competition away and they actually run a profit.

In example 1 Apple could be displaced merely by spending a trillion or so, but realize they earn a profit on each device.. Chinese slave laborers and political prisoners make a device and charge apple $180 or whatever, they turn around and sell it for $600. Hard not to make money in a market like that.

In example 2 your apparent restaurant could be competed against by anyone with $1M to construct a building, pay off the zoning commission, hire staff, advertise, buy cookware and food to cook, utilities, etc. Even so, the cost to the provider of a cup of coffee is 15 cents and they sell it for $1.99. Hard not to make money in a market like that, assuming volume is high enough.

So what stops a neo-hipster from replacing instagram as the new hotness. Well, I can register a domain for $5 and cloud host on amazon or competitors for next to nothing, being more creative than instagram can't be terribly difficult, and there seems to be no way for them to earn a profit. They're screwed.

Re:Like any sane person... (0)

Anonymous Coward | about a year and a half ago | (#40920055)

Why do people always say AC should log in?
You can mod AC up just like any other user (as we can see from the current +4 interesting).

Re:Like any sane person... (1)

vlm (69642) | about a year and a half ago | (#40923491)

Why do people always say AC should log in?

1) Because an individual earned a (pitiful) reward they are not getting, and should get.

2) More than a few /.ers have custom rules that auto subtract 1 from score if a poster is an AC. I had to click to expand to even see your well written question.... could have missed it. Wouldn't have had to do that were you not a AC. People do this because perhaps 50% of AC posts are still *NAA and so forth so you're usually not missing much.

Re:Like any sane person... (0)

mcwop (31034) | about a year and a half ago | (#40917795)

I said this back when the deal happened.

$1B for a service used by self-absorbed 'hipsters' to take photos of food and who pay nothing for it? Nuts!

Blah Blah With young people it's paying extra for things like Apple hardware when equivalent or better alternatives are cheaper. Blah blah.

So what if I hate windows, and Linux does not meet my needs but OSX does? I should just buy a virus prone Windows machine cause it costs less? There is more to it than just price. Either way a Mac Air is very price competitive to other comparable ultrabooks.

Re:Like any sane person... (0)

Anonymous Coward | about a year and a half ago | (#40920161)

WIth old people it's being waited on to feel served and important. They'd rather stand in line at a service counter even if what they want is trivial, even if it means waiting longer than it would take to do it themselves, even if they are able bodied and what they want done requires no skill.

You've never seen the hipsters in San Francisco waiting outside restaurants, I take it. The two most popular things to wait for around my neighborhood were brunch -- 45 minutes to be seated for plain old eggs, hash, toast, etc. -- and a restaurant that made sandwiches out of canned sauces and frozen foods like chicken fingers and french fries.

Re:Like any sane person... (1)

Mitreya (579078) | about a year and a half ago | (#40923125)

With young people it's paying extra for things like Apple hardware when equivalent or better alternatives are cheaper.

I am definitely not a fan of Apple. But this statement deserves a response. Apple has a number of products that DO NOT have viable competition. And all the hipster condescension is not going to change that fact.
For a while, nothing competed with iPhone (I did my research couple years ago and many of competitors at the time were announced products with no set specs). I don't know what the current state of android-based competition is.
Today (afaik) there is barely any competition to mac book air. I am only aware of one laptop line - Sony Z Vaio, and it certainly costs more than mac book air.

Re:Like any sane person... (4, Funny)

Bill, Shooter of Bul (629286) | about a year and a half ago | (#40917577)

What? Hipsters don't use instagram. They have phones that you probably haven't heard of and takes pictures you wouldn't understand.

Re:Like any sane person... (1)

Anonymous Coward | about a year and a half ago | (#40918991)

What? Hipsters don't use instagram. They have phones that you probably haven't heard of and takes pictures you wouldn't understand.

5 is insufficient.

Gee, you think? (4, Insightful)

ShooterNeo (555040) | about a year and a half ago | (#40917035)

In what universe was this considered a good deal? How on earth does a company that lets users take chintzy photos with a fake aging filter worth 1000 million dollars?

There's nothing that makes Instagram a natural monopoly : at least with facebook itself, the vast userbase it has makes it a de-facto monopoly. (just like there's only space in front of your house for one power company and one set of roads, there's only time for you to put inane status updates on one social networking site).

And, worse still, Facebook doesn't have the deep pool of genius level talent like google, so it's entirely possible that Facebook will not STAY on top. But at least it has most of the user base for social networking, and people use it to get stuff done. Instagrams an internet fad that gives the product away for free.

Shit...for a cool 1000 million, facebook didn't even get a deep talent pool of genius level software engineers. They bought themselves a whopping 10 or so employees. No matter how skilled, 10 folks isn't worth that kind of scratch.

Re:Gee, you think? (0)

Anonymous Coward | about a year and a half ago | (#40917071)

In what universe...

Still going with this? Oy...

Re:Gee, you think? (2)

c0lo (1497653) | about a year and a half ago | (#40917107)

There's nothing that makes Instagram a natural monopoly : at least with facebook itself, the vast userbase it has makes it a de-facto monopoly.

Like others suggested... how do you expect FB to keep its "de-facto monopoly" if it lets others challenge it? (even if on niches... after all FB launched itself in a niche!).

Re:Gee, you think? (1)

ShooterNeo (555040) | about a year and a half ago | (#40917243)

Well, I will admit that users can switch to another site moderately easily. But you lose all your current facebook friends and contacts unless you log in periodically.

It's a weak monopoly. A strong monopoly is something like windows, where you can try to switch, but no other OS can even RUN a huge list of applications, including virtually all games. Even stronger is the power company or ISP, where it's usually physically impossible to switch.

Re:Gee, you think? (1)

garcia (6573) | about a year and a half ago | (#40917533)

Normally I would say the data collected by Instagram (location, photo subjects, likes, connections, etc) are all worth a good bit of money. However, because Facebook already collects much more than that and the overwhelming majority of Instagram users are also on Facebook, I agree with you in this case.

Re:Gee, you think? (1)

WarwickRyan (780794) | about a year and a half ago | (#40920281)

It isn't worth 1000 million dollars. They bought it for 1000 million MOON-dollars: i.e. $1000 million of Facebook stock valued at $38. By the time they'll be able to sell said stock it'll be convertible to closer to $100m than $1000m.

Re:Gee, you think? (0)

Anonymous Coward | about a year and a half ago | (#40922285)

Why it might be worth it:

1. Facebook is number one in social photos. They need to protect that space in order to maintain users. Instead of 80 million users who may have also been posting to Facebook, they have 80 million users who are...
2. Instagram had plans to monetize photos. This would be huge for Facebook and could also help them monetize mobile.

If FB can monetize photos and mobile as a result of this, I bet they make that money back in a quarter.

Disclaimer: I own FB stock.

Universally Praised? (0)

Anonymous Coward | about a year and a half ago | (#40917101)

Pundits and analysts wer universally gobsmacked at the valuation, perhaps, but that's not praise. I haven't seen one saying it was worth a billion.

Which pundits and analysts (4, Informative)

mwvdlee (775178) | about a year and a half ago | (#40917155)

While pundits and analysts have almost universally praised Facebook's acquisition of Instagram.

Which pundits and analysts exactly? Because all I ever heard was how utterly insane the acquisition was.

A Forbes cover? Wow (3, Interesting)

crazyjj (2598719) | about a year and a half ago | (#40917161)

Well I think we all know that a making the cover of a business magazine [forbes.com] is pretty much the guaranteed path to a bright future in the internet startup world.

Re:A Forbes cover? Wow (2)

aclarke (307017) | about a year and a half ago | (#40917567)

I'd still be happy to be worth about $8M [celebritynetworth.com]. Sure, it could have been more, and at one time was on paper, but if this is true he still has done really well for himself.

Re:A Forbes cover? Wow (1)

Bill, Shooter of Bul (629286) | about a year and a half ago | (#40917777)

Keven Rose did allright for himself by selling digg. Digg itself? Well not so much.

The instagram guy will do pretty well for himself after selling out for a billion. Instagram? Probably not.

I think by any measure they have a bright future as individuals.

Users (4, Informative)

ledow (319597) | about a year and a half ago | (#40917249)

Apparently, "number of users" is now more important a metric than how many of those users are giving you money, or how much.

Just because they have 80 million users means NOTHING. There are at least 60m estimated users of Linux (if not a lot more) - it doesn't mean that ANY of them are generating any money for Linus et al.

If you have ONE user who's paying you money for your service, that's more valuable than 80m who aren't. Sure, you can get some ad revenue off the 80m if you play it right but that's dropping all the time, costs a lot to administer and doesn't provide massive amounts of profit direct to you. And the slightest change means that those 80m people - who have NOTHING invested in your business - will just move elsewhere. The same as MySpace users suddenly flocked elsewhere.

If they were paying customers, they would have a say, they would have a reason to stay, they would have a reason to explain to you what they didn't like and where/how you're better than the competition. If they're unpaying, they don't. The second you break the site for them (e.g. even putting an ad up in some cases), the second you lose all those users.

Users means NOTHING. Revenue means something. If your not monetizing your users, then you're not running a business and, thus, your business value is zero. It's like running a "free-to-play" game. Of COURSE you have 10m users. It's a free game. But if you can't turn X % of those users into paying customers, you're just pissing away development time and money.

It's like saying that when you gave out free samples of your cologne, a hundred thousand people asked for one. But when you charge £1 a bottle, you WILL NOT make hundred thousand pounds. Of course you won't. Anyone that thinks so is an idiot. However, if you said you had a cologne where out of the hundred thousand people, thousands of them paid you for it because it was so good, then you'd have a viable business. But still, when you start charging, you won't necessarily sell a bottle for every person who expressed an interest.

Any sale, on any stock market, that includes the figure of how many users - without context of how many were paying and/or how much profit they make per user - is worthless and only a sign that someone, somewhere is going to make a quick buck from all the idiots trying to buy the IPO by selling out extremely early before the ship sinks.

Users do not matter. I can have a hundred thousand visitors to my website, or ten thousand registered accounts. It does not mean that I would ever get a SINGLE paying customer at all, even if I changed nothing else.

Re:Users (0)

mooingyak (720677) | about a year and a half ago | (#40917327)

Apparently, "number of users" is now more important a metric than how many of those users are giving you money, or how much.

I got the idea in my head that rather than facebook, you were referring to 'your mom' (not yours personally, but rather that you were explaining what metrics are and are not useful when discussing one's mother).

Any sale, on any stock market, that includes the figure of how many users - without context of how many were paying and/or how much profit they make per user

Once I got the thought stuck in my head, various parts made me giggle, but that one the most. I need to grow up.

Re:Users (2)

mister2au (1707664) | about a year and a half ago | (#40917335)

You are correct ...

But if you take 80M of my profitable customers from me, it doesn't matter if you make no profit from them or not - I might be happy to just pay you $1B to go away

Re:Users (2)

ceoyoyo (59147) | about a year and a half ago | (#40917469)

Sssh. MBAs aren't all that great at math and they've discovered a SINGLE NUMBER that lets them assess the worth of a company. So much simpler than having to know about revenue, profit, growth, market characteristics, etc. Why do you think high frequency trading is so popular?

Re:Users (2)

mister2au (1707664) | about a year and a half ago | (#40917921)

mmm ... guarantee there are not many HFT that are also MBAs ... completely different segments of the financial markets

it is widely reported that Mark Zuckerberg engineered the whole acquisition over a 3 day period and I'd guarantee it wasn't done on a $/user basis

but more importantly, it would be the MBAs and investment banks telling the Facebook founders to get out - quite an astute recommendation ... while it would be the uneducated mom-and-dad investors investing ... so who's the dummies there?

Re:Users (1)

Bill, Shooter of Bul (629286) | about a year and a half ago | (#40917737)

Users do mean something. They represent potential revenue sources. You're correct that you do need to figure out a buisness model that does generate revenue from them inorder to survive as a buisness.They are one of several variables in an equation. You are so upset that people ( the media) pay attention to that one variable, that you discount its value too much. Classic knee jerk over reaction.

Re:Users (0)

Anonymous Coward | about a year and a half ago | (#40919341)

You are way off. Users are like cable TV subscriptions, they are not the customer, they are the product! The customer is the advertisers and companies hooking into your details and network.

Re:Users (0)

Anonymous Coward | about a year and a half ago | (#40919625)

In this case, the customer is not the user, but the advertisement and surveillance companies. Their metrics are eyeballs and demographics (and in the case of surveillance, personally identifying information).

Facebook has to keep offering utility and/or novelty to users to keep the eyeballs active. If they keep doing that, then their customers will still pay for Facebook's eyeball information.

One Facebook problem is that the advertisement and surveillance companies in the end may really only be interested in the eyeball information. Advertisers may care about it so they can better target their adverts in other realms that don't include Facebook (including...Google). Surveillance companies just want the information, both for trends and to identify individuals. At some point, Facebook to them just becomes another information provider (e.g., a commodity product provider).

For Facebook, users are the means to an end, not the end.

Re:Users (0)

Anonymous Coward | about a year and a half ago | (#40920091)

Just a nitpick:
m = mili (10^-3)
M = Mega (10^6)

Re:Users (1)

ledow (319597) | about a year and a half ago | (#40920427)

Only in a prefix for units. 80m is unit-less, and is thus 80 million.

80M is nothing but a code-number, as far as English is concerned.

Re:Users (0)

Anonymous Coward | about a year and a half ago | (#40923581)

M = 1,000 in Roman numerals, which is broadly used in American business and advertising (sigh) where you see stupid shit like "$10MM" = $10,000,000 or $1CPM = $1 cost per 1,000.

My Ten Cents (1)

mcwop (31034) | about a year and a half ago | (#40917259)

I love Instagram. If they stayed private, I have to imagine they have little overhead, and making a living for a handful of employees would not be hard - they would not have to monetize their base all that much. While they do have ways to make money in the latter scenario, it likely will not provide enough revenues to make the $1B purchase price worth it for Facebook. While I like FB from the perspective of connecting with family and friends, their UX is becoming annoyingly complex. Networks such as Path, Google+, and Instagram have great UX's in comparison.

Re:My Ten Cents (0)

Anonymous Coward | about a year and a half ago | (#40917417)

I love Instagram. If they stayed private, I have to imagine they have little overhead, and making a living for a handful of employees would not be hard - they would not have to monetize their base all that much.

"Making a living" out of Instagram would have been impossible. After the first week (Hmm, rounded corners? Sepia? What if we had square corners, or an Ektachrome filter!) what would they do all day?

With a billion dollars (or even $250M assuming $FB drops by 75% by the time any employee lockups expire), those ten employees of Instagram don't have to monetize their base either. They've cashed out!

Which is the only thing worth doing in the tech sector these days anyways. You either luck into a fad and sell the company before your fad dies out, or you become a patent troll, and the more time I spend in this miserable industry, the more I realize those are basically the only two options left. Woe betide the organization so suffused with its own hubris that it'd leave a gigabuck on the table in order to "make a living" for its employees doing 9-5 drudgework.

Re:My Ten Cents (1)

mcwop (31034) | about a year and a half ago | (#40917515)

Well yeah, take the billion of you can. But assuming they had no offers, there are ways they could make money. I also don;t think its a fad. I like Instagram, and have lots of friends that do.

Re:My Ten Cents (0)

Anonymous Coward | about a year and a half ago | (#40919311)

Well yeah, take the billion of you can. But assuming they had no offers, there are ways they could make money. I also don;t think its a fad. I like Instagram, and have lots of friends that do.

Fair enough, and yeah, I was being kinda hard on them for calling them a fad. What I meant was that in the time it takes to come up with an idea, raise capital, and either take it public or sell it to someone and exit at a profit, the fad's over. All Your Base Are Belong To Us lasted 3-5 years. LOLCats for a couple more, and Ben Huh made a small (and fun!) little media empire out of it, and now it's ponies. Fun, yes, profitable for a few years even without a massive buyout, yes, but nobody's going to get a full 20-year career out of a property like Instagram.

Even the winners end up imploding. Look at how even the mighty YHOO and RIMM have fallen; and those "old-school" tech giants are barely teenagers.

Re:My Ten Cents (1)

mcwop (31034) | about a year and a half ago | (#40919681)

Agreed, all things digital are subject to fierce competition, and the digital reaper always lurks behind you.

Monetizing? My A...! (1)

bickerdyke (670000) | about a year and a half ago | (#40917323)

It's hard to monetize 80 million users of a service that doesn't do more than any other free picture posting site out there.

I bet if someone tries to charge for that, sending photos by email will become popular again.

Re:Monetizing? My A...! (2)

mcwop (31034) | about a year and a half ago | (#40917401)

Maybe a company like Coca Cola pays Instagram to hold a contest for best Coke brand photo? The user gets a prize of $25,000. I bet people will use Instagram over email. Users pay nothing,

Re:Monetizing? My A...! (1)

bickerdyke (670000) | about a year and a half ago | (#40917489)

Why should said company do so instead of holding that contest over email? No money to pay to a useless service, even more potential users as they don#t need to sign up for instawhatever.

Re:Monetizing? My A...! (1)

mcwop (31034) | about a year and a half ago | (#40917605)

Anything is possible. But don't underestimate the user's ease of just putting it up on IG, versus taking photo, attaching to email, sending somewhere, getting posted to some app or site that I probably have to sign up for etc......

Re:Monetizing? My A...! (1)

bickerdyke (670000) | about a year and a half ago | (#40917671)

posting to some app or site that you have to signup for.... like instagram for example?!?!

compared to email that's already on my phone?

Re:Monetizing? My A...! (1)

mcwop (31034) | about a year and a half ago | (#40917739)

So you will give the world access to your email to see said pictures? I suppose your email has photo editing? Like and commenting? IG has a large built in user base, its a nice little app. Sorry, but email does not come close to providing the same user experience. IG created a nice product and a lot of people use it. With that said, the $1B price tag is retarded IMO.

Re:Monetizing? My A...! (1)

gl4ss (559668) | about a year and a half ago | (#40918659)

..because the users wouldn't know of the compo without instagram.

so what he's saying, the free service would be used as an advertisement vector, duh.

80 million unmonetized mobile users (0)

Anonymous Coward | about a year and a half ago | (#40917413)

80 million more people to track and shoot advertisements to. 80 million more reasons to sell advertising. It wasn't about money directly, more about selling advertising to directly.

Looking back ... (2)

smisle (1640863) | about a year and a half ago | (#40918043)

I don't know what they're talking about, MySpace was already long dead when News Corp bought them (where dead is defined as no longer the place where everyone and their mother's cousin creates an account). I was laughing at them the day they bought it, no need for hindsight on this one!

Youtube was what $1.8B? (0)

Anonymous Coward | about a year and a half ago | (#40918429)

...yet clearly Youtube has had more value-add for Google than Instagram could possibly have for Facebook. Youtube apparently is paying for itself quite well these days and of course is still very, very popular and the de facto video publishing platform.

Conversely the Instagram buy was orchestrated almost entirely by Zuck and reveals a bizarre immaturity, like he was a teenager with an Amex Centurion card in a shopping mall. It couldn't possibly have been fully vetted by the Facebook board.

The purpose of Instagram (1)

albeit unknown (136964) | about a year and a half ago | (#40918573)

The value of Instagram to Facebook has nothing to do with photographs per-se. Mining trends based on GPS location coordinates embedded within the EXIF data of the file, deriving nearby businesses from this, the time-of-day, and identifying groups of people based on facial recognition are the purpose. Then string together multiple photographs over time. These data sets are then correlated and sold. As long as people keep submitting pictures it's worth a fortune.

Defensive moves that failed (1)

Animats (122034) | about a year and a half ago | (#40919305)

Microsoft got into search as a defensive move against Google. They lost money on it.

Google got into online documents and spreadsheets as a competitve move against Microsoft's moneymaker, Office. That didn't make Google money.

Google got into phone software as a defensive move against Apple. That hasn't made money.

News Corp bought Myspace as a defensive move against online. That was a disaster.

Time/Warner merged with AOL to get into "the Internet". That was a disaster and they broke up.

Google got into social as a defensive move against Facebook. So far, that hasn't worked out too well.

Facebook got into photo sharing as a defensive move against Yahoo's Flickr. That didn't work.

Re:Defensive moves that failed (1)

Phelan (30485) | about a year and a half ago | (#40922293)

Pretty sure Android is profitable for Google. (est $3.7 billion per year in revenue)

Can't validate the comment on Google Docs but I'm pretty sure their enterprise Google Apps Domain accounts continue to grow

It's The Architecture... (1)

jklappenbach (824031) | about a year and a half ago | (#40919927)

A large part of Instagram's value exists in the experience and strategies that allowed an initial three employees to manage a scalable, distributed application serving 10s of millions of customers. If Facebook is able to successfully incorporate Instagram's knowhow into their current stack, they could see significant savings in operations and management. That, alone, is worth billions of dollars.

More on Instagram's architecture [highscalability.com]...
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