A glass of water can be worth more than the New York Times if Zuckerberg is lost in the desert and you happen to have water. It can be worth even more if Larry Page is dying of thirst at the same time and starts a bidding war.
For FB to maintain its leadership position -- especially with an IPO around the corner no less -- it needs to periodically "eat up" any new threats that may come along. This is afterall the tech space where "low-cost barriers to entry" are common, making this industry very different from what you read in business school.
So, if I was a (future) shareholder of FB I would simply need to be wary of these periodical "write-offs". Afterall, isn't this really what happened to Yahoo? It had to keep spending money to stay relevant until their common shareholders got disillusioned?
It'd be awesome to be able to leave my pet with other fellow pet owners. I'd be willing to take pets in my house as well to keep my cat company.
I don't care if you're selling whale shit online, if a whole lot of customers line up the second you mention your idea, you're in business whether third parties like it or not.
http://www.chicagoreader.com/Bleader/archives/2012/04/09/bre...
Whale guano. Seriously.
True. But only if you have the only water on sale in the desert.
What is instagram anyway? It tints photos and uploads them? That would cost Zuckerberg or Page maybe $10k to code and roll out a clone. I don't get it. Unless they're paying the owner of a rival tap to turn it off. But then someone else will just open a new tap, the barrier to entry is low. I still don't get it.
Make no mistake, this is a crazy amount of money spent on a less then 2 year old, 13-man company. I think post-IPO, Mark might not have been able to get this as easily approved by the board of directors.
The success of these new things like Instagram and Tumblr seem to be their mindless simplicity.
Of the four engineer/developers, only one of them wasn't hired in the last few months. One of them was hired two weeks ago, one in January, another in December.
So only one developer is responsible for the app and all the servers, the others haven't hardly had time to get up to speed.
Not surprising, the iOS version is trivial since CoreImage' image processing library provides all the filters and image processing. Doing the port to Android was the hard part, although most likely they just licensed an image processing library from someone, or extracted it from GIMP's open code.
I think it is realistic to say the cost of developing the iOS version, which is what most of their 30 million customers are using, was well under $100,000.
But secondly, I'm not sure how you went from 13 people to 3, lets assume we we accept that we are only talking about the 3 people. Even if those 3 people are making only $50k yearly salary, working on this for 6 months is already costing Instagram well over $100k once you take into account office space, benefits and hardware.
Edit: I don't mean to rubbish what you're saying. I agree that it and the brand have value but to me that equates to something like $150 to maybe $250 million at a push. $1 billion is off the wall.
Edit 2: as is a $100 billion valuation for FB.
Mentally, I lump Instagram, Pinterest and other en-vogue social-ly apps together. Speaking of the latter, I would imagine they're probably rubbing their hands with glee right about now.
I largely buy the gigaom explanation (http://gigaom.com/2012/04/09/here-is-why-did-facebook-bought...). That's why the water-in-desert metaphor is, IMHO, very apt.
Deserts tend to be deserted. "The only water seller" is redundant.
Instagram does not produce more value for more people than the New York Times, our newspaper of record. It is an app that nearly everyone reading Hacker News could write in less than a month, and scale just as easily. Facebook could have added photo filters to its photo sharing site in less than a week and suck up a good portion of Instagram's audience. I'm still at a loss to explain why this was a good idea - but I guess we'll see if it bites Facebook in the ass.
This purchase, and the fact that people having a tiny idea are given multi-million dollar seed rounds regularly, are why I think we're in another bubble.
What if you don't bother to drink the water? What do you call that?
Call me naive (I am), but there has to be more to this than the respective to ones needs narrative. Here's a few points that I've soaked in:
- Instagram will continue to be a separate entity
- Instagram "brand" is worth $
- Instagram revenue is worth ?
Perhaps Instagram should've been worth more than a billion to Google, but that's another discussion.
Google's net income was $9 billion in 2011(http://en.wikipedia.org/wiki/Google). According to Facebook's S-1 filing in February 2012, Facebook's net income for 2011 was... $1 billion(http://www.sec.gov/Archives/edgar/data/1326801/0001193125120...).
The real question still remains: Why is Instagram worth that much to Facebook?
Rich and smart people make plenty of mistakes, and are just as prone to tunnel vision as the rest of us.
However, I am fairly certain they view this acquisition as protective rather than expansionary. Picking up Instagram just means it can't be used against them (FB), not that it has some hidden-to-the-masses potential for being monetized.
If it had no potential to be a sustainable business, how could it be a threat to anybody?
Now, the funny thing about this is that I can understand Larry Page thinking that he is dying of thirst from lack of penetration into the social media world. But Zuck? The smart thing would have been to let Google have it. It's 14 guys. And an app. Puhleeaz.
What this tells you is that Zuck doesn't really know what's going on and that Google can exploit this. Google has a lot more cash than Facebook, and if Google keeps playing this game, Facebook is going to be distracted as hell. And broke before too long.
Part of the problem is that Facebook is facing an employee revolt. They've been clamoring for their IPO exit for a looooong time, and they've had to put up with Zuck and his crew.
Part of the problem is that Facebook is pissing users off, especially with this new timeline nonsense. People want nothing to do with Facebook, but all of their contacts are on Facebook, and its the perfect medium for building a personal brand and connecting with friends.
Facebook is the Yahoo of social media. But it's 1999, the bubble is growing like crazy (it will pop soon) and nobody, absolutely nobody, has heard of the little company that was founded last year that will eventually come to dominate the social media world.
Oh really? Do you have the engagement stats to back that up?