It is really obvious by now that Facebook has acquired Instagram for nearly a billion dollars in cash and stock. Incredible, isn’t it? But really to say the fact, no one saw this coming but it is now bygone. So what the heck is Instagram? Instagram is a free photo sharing mobile apps that allows users to take their photos, apply digital filter to it and then share it among friends on a variety of social networking services. Instagram was initially supported on iPhone, iPad and iPod touch, but you can now use it on your Android camera phones too. so what business does Facebook want to get with this apps?
On April 12, 2012, Facebook acquired Instagram and its 13 employee for almost $1 billion in cash and stocks. A few months ago, it was rumored to be valued at $500 million, or some times $300 million. Its last round just a year ago – valued the company at $100 million. The rising valuation of the company was reflective of the growing audience it has been gathering, despite being just on the iPhone as at that time. It had reached nearly 30 million registered users before it launched an Android app, a turbo-charging event for the company. This apps is now distributed via the iTunes App store and Google play.
So the bone of contention is: Why did Mark Zuckerberg, The founder of Facebook, buy Instagram at twice its valuation? The answer is found in Zuckerberg’s own blog post and i quote:
"This is an important milestone for Facebook because it’s the first time we’ve ever acquired a product and company with so many users. We don’t plan on doing many more of these, if any at all. But providing the best photo sharing experience is one reason why so many people love Facebook and we knew it would be worth bringing these two companies together."
If you are still wondering why Facebook would pay that amount of money for a company like Instagram, the answer is simply about advertising and competition. Facebook wants to make more money from what looks like a money losing deal. And below are the insights on how Facebook might achieve this:
1. Follow and like brands on Instagram just like on Facebook:
On Instagram, people voluntarily subscribe to brands pages which are very important to Facebook as they are the bedrock and entry levels offering adverts for advertisers. with Facebook follow and likes embedded on Instagram, it is a good move for exposure.
2. Integrating Instagram account with Facebook pages:
With this, it allows brands to import streams of Instagram pictures directly into their photo-friendly Facebook timelines.
3. It will keep people addicted to photos on Facebook, and Facebook makes money by selling ads next to users photo albums. A good reason why people stick to Facebook is because it contains years worth of family snaps. And Instagram was proving so popular that it becomes a threat. I believe that is why Facebook paid over a billion dollars to acquire this company even when it has no revenue.
4. It will helps Facebook gain local control over advertisers:
The Instagram/Facebook API creates a lot of location data linked to the identity information Facebook holds, and thus create new opportunities for advertisers on Facebook to target their audience.
5. It took Twitter and Foursquare by surprise:
Instagram currently uses the fouresquare's API sign in method, and i believe Facebook will switch to the Facebook API which will render foursquare less relevant. with Facebook/Instagram, users can post Instagram pics on Twitter environment, that is the data Facebook previously didn't have on the micro-blog company.
6. Facebook had a Competitor: a competitor that could not only kick its butt, but also destroy its future prospects. Why? Because Facebook is essentially about photos, and Instagram had found and attacked Facebook’s achilles heel via mobile photo sharing.
I hope Instagram allows more apps to export directly to its network. By opening itself available to other apps and services, it has the potential to slowly become the hub of mobile photo experiences. And in the end, that’s what would make Instagram so much more valuable and in the process become the Flickr of mobile photos.
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