Instagram: A billion bucks of fun

Correction: A previous version of this story cited Zynga as purchasing Draw Something for $1 billion, the purchase price for OMGPop, makers of Draw Something, was $200 million. This version has been corrected.

April 13, 2012

In March, the internet’s collective jaw dropped when social game maker Zynga dropped a cool $200 million to acquire OMGPop — the makers of Draw Something, a cute little iPhone Pictionary-type game that went from zero-to-100 million users in the span of a few short weeks.

Then Facebook went and bought Instagram, another iPhone app (just recently made available on the Android platform) which lets you take your ugly pictures, make them look intentionally ugly (they would use different adjectives like maybe “personal”) in the style of a $20 plastic Holga camera. Instagram has been an iPhone staple for just over two years now, and also has a user base of over 30 million people. The price is a cool $1 billion.

Two apps, in the span of a couple of weeks, capitalize on two truths. Truth number one: Most of us are pretty terrible artists. Truth number two: The lack of any artistic skill whatsoever won’t stop anyone from trying. Nothing makes a bad photograph look tolerable faster than blowing out the levels, throwing the contrast out of whack, and adding sepia tones. And I’m not the world’s finest illustrator, but when the collective canvas is a finger stylus on a 3.5 inch screen, my stick figures are just as good as anyone else’s.

Zynga and Facebook each have a gaping hole in their business model. In Zynga’s case, its mobile strategy hasn’t been very impressive. In fact, they are almost entirely dependent on Facebook where Flash is the norm. Getting their hands on Draw Something gives them a huge user base on a mobile phone, but more importantly, those users aren’t walled inside The Social Network.

Facebook, on the other hand, seems to have a harder case to make. Instagram is a nifty program with a lot of users, but Zuckerberg & Co. already have huge iOS penetration — theirs is one of the most-often installed apps on the iPhone. And judging by my Facebook news feed, there’s no shortage of out-of-focus pictures. In fact, Instagram photos already appear pretty frequently: or rather, they did a year or so ago before it became a cliche. One poll even pegs Instagram as the worst of the “photo irritations” on Facebook (assuming you trust a poll conducted by a company that might have an axe to grind against free photo editing utilities). And how long before the Draw Something fad is just another Rubiks Cube? Do any of your friends still play Mob Wars?

There are a few clear messages here. First, if you manage to work your way up to a 9-figure user base for an iPhone app, you are now apparently worth a billion dollars. It doesn’t matter if your users are artificially aging photographs, or doing something actually useful. Second, the new generation of big Internet players are here, and not scared to spend their IPO riches. And third, everyone loves to make and share stuff — hopefully apps that empower everyone to feel a little more creative will be the trend to follow. This makes me much happier than the endorphin-regulating crop of free-to-play apps like Tiny Tower that have made a science out of maximizing your play time for the minimum amount of fun.

In other words, fun is now worth a billion bucks, provided you can get a user base half the size of the United States to install it on their iPhones.

Full disclosure: The Washington Post Co.’s chairman and chief executive, Donald E. Graham, is a member of Facebook’s board of directors

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