Is US$1bn too much for Instagram?
Global - US$1 billion is a lot of money. US$1 billion for a company that has yet to celebrate its second birthday is an awful lot of money. Or is it? It kind of depends on the objective Mr Z had in mind when he opened his bulging wallet.
Given Facebook already commands an army of 850 million users globally, the purchase clearly wasn't about buying in Instagram's measly 30 million users. It's been widely reported that Facebook is struggling with its mobile proposition. For a property that gets about half of its usage via mobile, that's a problem. US$1 billion is however, an awfully big outlay to buy in some (albeit pretty sexy) mobile app functionality.
I think the truth goes deeper than this. Was Zuckerberg scared of Instagram eating his lunch? I'm not sure he was. I think it's more likely he was inspired by a beautiful product, a product that his developers have so far failed to deliver. Facebook is ultimately about shared experiences. People seem to prefer to share pictures rather than text where possible and where it's easy to do so. Smartphones unite these two forces. Cue the rise of Pinterest & Instagram.
What Instagram does beautifully, is allow the image to transcend the text. Facebook is still governed by text - my witty status update or my check in at a certain location avec commentary. Instagram delivers messages via a snapshot in time; somehow it transforms the simplest snap in to a memorable and poignant work of art. We used to be content with a world wide web that was text based. As broadband speeds multiply, we yearn for sharper imagery (witness the iPad 3 retina display) and for moving images, i.e. video. The only true barrier to a mobile video sharing platform is connection speed.
Instagram instantly brings to Facebook a proven concept for sharing visual experiences. Still snapshots will quickly evolve in to video clips & who owns the biggest video property on the web? Google. Simultaneously, video sharing is rapidly becoming a huge part of what people do on Facebook (particularly amongst the kids), & it defines what You Tube users do.
I therefore fundamentally think this move is a defensive play against Google. Through You Tube, Google wants to ‘own' video. Google's mobile trojan horse, Android, is on a ferocious march with a 300,000 strong app store already in place. Google also happen to be rather dominant in the search space (& one increasingly being driven by image & video) and no-one gets even close to Google in mobile search. Google has struggled with its web content strategy, but has its eyes firmly set on owning both search & content on the mobile.
Google have struggled to monetise a network of video generated by users you don't know, but on Facebook, you are sharing with your friends & people you know. Facebook is consumed heavily on mobile but before Instagram, Facebook had a pathetic mobile offering and importantly no mobile ad model. Imagine contextual, location based mobile ads targeted to static and moving images, with a thumbs up from one or more of your mates for good measure. Imagine Facebook Mobile.
Reads far better than Google Photo Sharing for Mobile if your initials are MZ.
Should you log on to any blog right now, you will witness a plethora of superlatives describing the relationship that users have with Instagram. Partly, because it's an intuitive application in your hand and partly because it's in tune with the human psyche, Instagram commands true adoration, something that Zuckerberg must worry his platform is a little lacking in.
Does US$1bn still sound like a lot of money? It might do if the 30m users desert the platform in the fashion being predicted by many. If not, in 18 months time, this move could be seen as a masterstroke by Zuckerberg.
Contributed by Paul Frampton (pictured), managing director, MPG Media Contacts
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