Instagram: What makes it worth $1 billion to Facebook?
By Hayley Tsukayama,
Facebook’s $1 billion acquisition of Instagram is a clear sign that Facebook, at least, is taking the rapid shift to mobile platforms seriously. While the social network has one of the most popular apps on the market, the company is still centered around the desktop experience and has admitted that it’s a little concerned about its mobile strategy.
In fact, it paid out twice as much as Instagram’s last estimated value to snap up the photo start-up — possibly because it’s a purely mobile application.
Guy Rosen, the chief executive of Onavo, which monitors mobile data, said the acquisition is “definitely a huge milestone for mobile.” There hasn’t been an acquisition this large of something purely mobile, he said, but the Facebook acquisition recognizes that “Instagram is on to something, on to what it means to be viral,” he said.
Apart from viral appeal, though, Instagram has the loyalty of a growing community of creative people that distinguishes it from other flash-in-the-pan fads such as Color, another photo-sharing app that launched to much fanfare and failed to gain traction, prompting a redesign only months later.
In its two years, however, Instagram has grown on the iOS platform and recently opened its community to Android users. The service now has 30 million users — up from 5 million in June — and the app is the sixth-most downloaded iOS application, according to Onavo’s numbers. That means it shows up on roughly one of every 10 iPhones.
“It’s the most popular social network apart from Facebook and Twitter [when it comes to apps], and the only mobile-only network,” Rosen said. “You can see how Facebook is really trying to address this gap by tapping into Instagram.”
Michael Scissons, president and chief executive of the social marketing firm Syncapse, said that Facebook is smart to look to Instagram and attempt to capture the creativity of its users in the same way.
“This is part of Facebook's. . . strategy toward making Web their own,” he said. “And it is based on users building their own content.”
Scissons said that he believes Instagram will become a core part of Facebook, which has said in the past that photos are a vital part of its social network. He also believes that the social network will do its best to keep the spirit of the photo service intact to keep its fans coming back and to keep Instagram’s talent happy.
“If you pay $1 billion for that team, there’s a strong probability that it will remain independent,” he said, drawing comparisons to Google’s acquisition of YouTube.