Instagram is simply an app that allows users to share photos from their mobile. Some people consider it as a micro blogging site because it allows them to tell others about their life through photos. Instagram has gained a massive success since its launch in October 2010 thanks to the simplicity of the app.
Its success story is actually similar to Twitter’s success story, which had started earlier in March 2006. While Twitter focuses on social networking through words, Instagram focuses on social networking through photos. Another feature that makes this social networking site more attractive is the editing and filter functionality, which makes users look like a professional photographer.
Now it’s Facebook’s Subsidiary…
It was a shocking news when Facebook bought Instagram for $1 billion. It was a year and half old when the acquisition took place and there were only 13 employees working for the company, surprised? People have been discussing about the acquisition and the most common reaction is “why it never crossed my mind before!”
Just like most people, you might be wondering why Facebook bought it and does this young social networking site deserve the $1 billion price tag? Userbase is perhaps the best answer for the latter question. Instagram’s users have reached 30 million users only within one and half year, a very impressive growth even Facebook needed about three years to reach the same number of users.
The acquisition has made Instagram got additional 10 million users, making it the fastest growing social networking site. It cannot be denied that many analysts view the acquisition as Zuckerberg’s defensive maneuver. When a giant digital company takes over its smaller counterparts, the main motive is always the same that is to minimize competition. Anyone knows that nothing is impossible for big brands like Google and Facebook. With hundreds of engineers behind them and millions user base, they can make whatever product they want and make the product popular instantly. In the unethical scenario, they could just steal the main concept of Instagram, but buying the company seems to be a better strategy to reduce possible threat in the future.
It’s getting more interesting…
For $1 billion price tag, most people assume that Facebook already has a plan for Instagram. In reality, there is no significant monetization effort toward it, at least until now. So, how can Facebook take back its massive investment if Instagram shows no capability of making money? Among many predictions on how Facebook gets back its investment, gaining data is the most possible reason. When users use Instagram to take photos, they send information like location and date to Instagram’s servers.
For Facebook, those photos and their data are valuable social graph information. Moreover, about 20 percent of Instagram users who connect their account with their Facebook account constantly take pictures with Instagram and then upload the photos to Facebook. This additional social graphic information can be a good way to enhance Facebook’s revenue from the mobile area.
UI (User Interface) is another possible reason how Facebook gets value from Instagram. Facebook is basically intended for desktop, not for mobile. Although it performs pretty well with mobile, there is a vast area in the mobile world that needs be optimized by Facebook. Buying Instagram can be a shortcut for Mark Zuckerberg to explore the mobile area based on the fact that Instagram is a mobile app and it dominates the mobile area.
Apart from the expensive price tag, the acquisition is perhaps the righteous decision as it makes Facebook to remain competitive against Google+. In 2010, Google bought Picnik to add photo editing tools in Google+. With the aggressive expansion of Google+, it becomes reasonable why Zuckerberg dares to spend such a huge investment for Instagram.
You may still remember when Mark Zuckerberg declined $1 billion offer for Facebook. After going public, $1 billion now seems a small figure for Facebook since this social media giant is now sitting comfortably in $100 billion level. At that position, buying Instagram is definitely a small investment apart from the recent rumor saying that Instagram founders were asking for $2 billion for the acquisition.
Although the main reason of the acquisition may remain unknown, but it can be the combination of the above predictions. With the fast growth of Instagram users after the acquisition and the positive valuation of Facebook, the acquisition is indeed a smart investment.
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