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Comment by wavephorm | Hacker News Reader

That's an awful lot of money for a business that had no revenue and had no business model of any kind.

http://windonaleaf.net/post/20464525754/instagram-perform-ad...

I agree...but the point was not about the revenues, the point was about making sure that when you think about photos - to share or to browse(which is the most used app on Facebook), you think about Facebook. The risk of being displaced by Instagram on that crucial activity was too high for Facebook.

So Facebook is like giant a rail company in the late 1800s.

Well... 1B is an amazing amount of money, but it is "just" 1% of Facebook post IPO value. What are the odds that Instagram growing more and more, the market freaks out, and Facebook stock loses 3-4% in a few weeks. Facebook buying Instagram is an insurance against this bumpy ride happening, and at a price much less that what it would be on the stock once Facebook becomes public.

Except that in the 1800's you couldn't build another B&O in six months with a couple of nerds with Macs.

You're thinking of Valve.

It's a strategic acquisition. Such acquisitions are common, especially in the Valley. This is one reason why startups should primarily work to "make something people want" (the official Y Combinator motto) rather than focusing on making money. True, sometimes a startup achieves spectacular growth without ever finding a way to turn it into money, but examples are surprisingly rare. Can you think of any offhand? Maybe Twitter, but I'd bet they'll find a way to be hugely profitable someday.

Not to mention no product since it duplicates the 'share on twitter' functionality of the camera app.

In 2 years, nobody will remember what instagram was.

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