A few hours ago I read that Facebook had acquired Instagram for $1bn… aptly enough, this news came to me via my Facebook feed.
There’s also an official release here from Mark Zuckerberg
My first thought once I checked the legitimacy of the story was to tip my hat to the founders of Instagram…. I can’t imagine how they are feeling right now after picking up such a large cheque (with stock) for an application that was until very recently an iPhone only app. Fair play to them!
They’ll be a lot of noise now about whether Facebook have overpaid, that might be the case; however for me it’s a pointless argument because the fact is that Facebook have paid because they perceive a value in Instagram, so I was keen to look into this in more detail.

Instagram The Facts
For those of you not bit by the Instagram bug or indeed users of any other mobile device apart from iPhone; Instagram is a free photo sharing application that allows users to take a picture, or use one from their albums and apply a filter and then share said picture. The picture is shared with your followers on Instagram and via other social platforms you choose to integrate with, for example mine is connected to Facebook, Flickr and Foursquare. Below are some quick facts to provide you with a general understanding of Instagram:
- Instagram launched on the App Store in October 2010
- Instagram has 13 employees
- In April 2012 Instagram announced it had 30 million accounts
- When Instagram was launched on Android earlier this month, it received one million downloads in twelve hours.
- Over 1 Billion photos have been uploaded
Where is the value in Instagram?
At first glance it is not easy to see why Facebook paid $1bn for Instagram, especially when you consider that Yahoo purchased Flickr for an apparent $35m in 2005. However to use that as an argument would be shortsighted, the world is a different place than it was in 2005… it’s certainly more mobile and this could be the first clue as to where Facebook see the value.
Another classic business move would be to block out other potential competitors, it is easy to overpay for something desirable if there are other potential buyers hovering… if this was the case (and we may never know) then it’s often only a big offer that will win the day.
There was talk and rumours last year that Facebook were developing their own photo sharing application, this news came in via Techcrunch, this never made the light of day and if it had, could it have competed with Instagram? Indeed, is it possible that Instagram was already better than what they could have created in such a short space of time?
When Instagram was launched on the Android platform last week, it experienced 1 million downloads in 12 hours. I accept that it won’t continue at this level, however this suggests that it is a still growing platform. They’re already at 30 million users, how long will it take them to get to 50 million users. We’ve already seen what momentum can do this year with Pinterest, which is now the third largest social network.
So for me, $1bn does feel like a hell of a lot of money. However, it is possible to start piecing together a strategy of where Facebook will see future value. An option not mentioned above is that Instagram is currently not monetised, whilst I think they would risk losing users if they introduced ads to the platform, I am sure that this would have been discussed…. even a simple business model of selling new filters, ad free apps, links to ecommerce for prints etc would be options for Facebook.
My gut feel is that the world is becoming more mobile, this is a move that enables Facebook to learn more about that world and leverage one of the greatest “mobile only” applications… it could be a small price to pay, especially if you remember Facebook’s previous attempts at mobile. It would certainly be very difficult and very expensive (if not impossible) to compete with Instagram now, with little chance of persuading users to another platform.
The Future
Mark Zuckerburg has already said “That’s why we’re committed to building and growing Instagram independently. Millions of people around the world love the Instagram app and the brand associated with it, and our goal is to help spread this app and brand to even more people.”
Personally, I will continue to use Instagram. The fact that Facebook own it now is only good for me because I feed a lot of my pictures through to my Facebook wall. I like the simplicity of this and look forward to seeing more users come to the Instagram platform.