Originally published at the Lorry I. Lokey Graduate School of Business Net Impact Chapter at Mills College, The Soulful MBA Blog
Today the blogosphere was ablaze with the news that Facebook has planned to purchase the social media hipster darling Instagram. For those who aren’t familiar, it is a mobile photography app with all the saccharine-sweet built in nostalgia of the Millennial Generation longing to keep themselves young forever. Its cute, like Zooey Deschanel playing a ukulele. Users love the built-in filters (called “masks”) that allow them to alter the coloring of the photo for a more epic viewing experience. (see my coffee table flowers and my “clear-skinned face” courtesy of Instagram) From there users can share directly to Facebook or Twitter. The best part of the app: taking a voyeuristic view into the personal lives of your friends, who snap and mask everything and chronicle it in the photofeed. Like Facebook with way less words.
…In fact, Instagram is so damn cute Facebook is paying a cool BILLION to acquire the company.
Is anyone else getting a little bit worried? What about Instagram is worth $1 billion in acquisition? Do they own patents that couldn’t be easily replicated in similar iPad or Facebook applications?
Facebook’s business strategy has seemingly become increasingly predatory in nature, especially leading up to their IPO next month. Many independent social sites saw the writing on the wall and fell in line, almost as if they unanimously conceded, threw up their arms and declared “If you can’t beat ’em, join ’em!”
The blog site Tumblr got popular because of the funny homemade memes that were central in its design– large, eye-catching photos with funny phrases on them that were easily shareable through multiple social media platforms. Facebook caught on and duplicated this style in its own redesigned newsfeed, cutting away at some of Tumblr’s base.
Facebook has even taken cues from sites like Digg (a social news aggregation site) and LinkedIn (a professional business network) and WordPress (a collaborative coding and web-design platform) in its new application integrations. Facebook wants to remind you that you really only have time to spend your entire day on Facebook.
What is unique about the Instagram Billion Dollar Buyout (just doesn’t seem as cute now, does it?) is that Facebook has no plans of changing the application or duplicating the service, but instead letting Instagram function as usual under the Facebook umbrella. San Francisco-based Instagram has just 13 employees, each stand to profit $76 million off of the buyout.
Facebook is looking at completing an IPO next month estimated to be valued at $100 billion. (That’s about 380 Mitt Romneys, to put it into perspective.) Purchasing Instagram was not only ballsy, but it was strategically genius. Facebook established itself as the 800-pound sumo warrior in the court with a bunch of girl scouts.
But what is troubling about this is that the profit model of this acquisition is non-existent. How can you throw a $1 billion price tag on a disposable camera? The economy is in an upswing, Millenials like Mark Zuckerberg are helping push it up higher, I just only hope we don’t fall over the edge into the dotcom graveyard we thought was only a 1990s urban legend…