Facebook has recently made a somewhat puzzling decision to buy Instagram, a popular photo-sharing app, for no less than $1 billion. Not everyone is perplexed with their decision, but even if the reasons seem obvious to you, there are certainly some unanswered questions about this transaction. Apart from an association with a huge brand name, what is it exactly that Facebook is hoping to gain with this purchase?
Well, first of all, Instagram already has some 30 million users and that number is expected to significantly increase due to the fact that the app has recently been made available on the Android platforms. The number is now expected to reach 100 million. Even though this is an impressive number, it is dwarfed by the 850 million users that Facebook already has, and if its expansion up to this point is any indicator, it shouldn’t be a problem for Facebook to attract that 100 million users within the next year without the slightest effort, not to mention without a $1 billion investment. Besides, Facebook’s problem is not an insufficient number of users, it’s translating those users into income, if you are not making money of them it really shouldn’t matter if you have 850 or 950 million users.
Another reason this purchase might seem justified lies in the fact that mobile networking is becoming ever more important and Instgaram is already a well established name in that domain. But this still leaves the problem of revenue, it even increases it. Facebook already has some 425 million users that are monthly accessing it from their mobile phones, but instead of trying to increase that number, Facebook would probably want to keep more people coming from PCs, seeing that while they can at least show adverts on PCs and make some money that way, they don’t have the same possibility with mobile apps and it is uncertain that they will in the near future.
It might just be a way to eliminate a potential competitor, with its expansion to Android platforms Instagram becomes a larger threat to Facebook’s domination of the market, but even though for a while it was one of few options, that is no longer the case, photo-sharing apps are now common enough, and the threat that Instagram itself now poses doesn’t seem to be worth $1 billion to negate.
Some might argue that Facebook will be getting a lot of new personal data – geo-tagged photos and the like, but Instagram’s contribution to Facebook’s already enormous data pool seems minuscule in comparison and not nearly worth all that money.
Of course, there is still the fact that by purchasing Instagram, Facebook is preventing some of its competitors to affiliate themselves with that brand. The social network will also gain access to some of Instagram’s engineering solutions that can greatly help with mobile expansion, and generally, Facebook’s interface. Even though most of these reasons don’t seem to justify this decision individually, when you combine them this purchase stops looking that odd, but even then, one has to wonder if this was the smartest decision that Facebook’s execs have ever made. I guess that only time will tell.
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Facebook did really make a drastic decision about this one. But pretty sure they have their own purpose about this.
Facebook’s seemingly impulsive decision to splurge $1 billion on Instagram became more suspect after rumors surfaced that Zuckerberg brokered the deal on his own within the span of a weekend. Sources say it became an internal issue because he didn’t wait for the green light from the company’s board of directors. If it’s true that Zuckerberg went as far as to breach protocol to acquire Instagram, there must be more to it than just eliminating another competitor – if that had been the case, why didn’t he spend $1 billion to acquire Pinterest instead?
First it was Skype, now FB bought Instagram, I wonder what could be the next big and bold step to be taken by Facebook.
Facebook Buys Instagram For 1 Billion, Turns Budding Rival Into Its … growth to report to convince investors to stay put and convince new ones to buy the stock.
Thanks for the marvelous posting! I truly enjoyed reading it you are a great. Facebook did really make a drastic decision about this one. But pretty sure they have their own purpose about this. Thanks a lot for sharing this.
I guess it was a pretty thoughtful act. Since, integrating instagram into facebook would add to the user experience and thus help Facebook expand their reach and keep their current users interested.
Facebook did really make a drastic decision about this one. But pretty sure they have their own purpose about this.
“Facebook did really make a drastic decision about this one. But pretty sure they have their own purpose about this”. He is right:)
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“Facebook did really make a drastic decision about this one. But pretty sure they have their own purpose about this.” He is right