After seeing the original article via the telegraph http://www.telegraph.co.uk/technology/facebook/9194989/Facebook-buys-Instagram-inflating-the-new-tech-bubble.html the Answer IT team, (having been long time advocates of the Facebook platform) wonder how this will impact the industry and a global userbase.
Here at Answer IT - we continue to offer our clients the best routes to market when marketing to your target audience - and we can't help but think that Facebook has once again backed a winner.
Unlike earlier Facebook acquisitions such as Gowalla, Instagram has a significant user base in its own right, of around 30 million registered smartphone owners who have been promised the favourite photo app will retain its own identitiy. But with no particularly unique technology, the cash and stock Mark Zuckerberg will lay down for the firm is eye-popping.
Instagram by numbers:
By way of illustration, today $1bn could also buy The New York Times Company (Q4 revenue $643m, market cap $942m). The website of its flagship title has an estimated online readership of more than 44 million per month, some of whom pay to access it, unlike Instagram's users.
A more directly comparable online media property, the popular photo sharing network Flickr, was bought by Yahoo! for $35m in 2005, though it had a fraction of Instagram's user base at the time.
The apparent mismatch between Instagram’s business and its valuation is inviting unflattering comparisons with earlier big money social network acquisitions:
Those old enough to remember the original dotcom bubble, which began deflating in 2000 (when Mark Zuckerberg turned 16), are even recalling some of the British technology and web industry's most spectacular miscalculations:
Even those who have benefited from ambitions technology valuations, such as Bebo's Michael Birch and Ernst Malmsten of the defunct clothing website Boo.com, have sounded the alarm over recent valuations, calling them "a bit silly" and "crazy" respectively.
But Facebook was itself criticised for its low revenues for many years and clearly values Instagram's brand and smartphone appeal more than its bottom line.