Facebook Buys Instagram for $1Bn

[fez]

Don't get it myself.

Take a picture, apply a filter that makes it look like you developed it 10 years late on cheap 80s stock and hey presto. Anyone looked at pictures from the 80s? Wouldn't they all look much better with proper colours?

I really like looking at old photos sometimes. As with a lot of things, unless you are very good at what you do, obscuring the detail will improve the overall effect.

If you are a great photographer then its unlikely that a filter will make your photos look better but most peoples facebook photos are dire and would look better if stylised.

 

[DBT85]

bet the instragram guys are laughing!!!!

All 13 of them are. Yep, just 13 people work at Instagram.

With 30 million users of the app they generate zero revenue.

The New York Times is valued at around $0.97 BN.

Some stats we just threw up on our broadcast (CNBC)

 

[SAM81]

Yep... I think Apple, Google, Facebook et all are all set for a correction. What strikes me about Apple is that unlike other competitors they have all their eggs in one basket, and they are in every stage of production of their stuff.

Microsoft just make the software, likewise with Google. Samsung have their fingers in many pies... but Apple make the software, the hardware, the retailing, the servicing, and they effectively control the content on it too.

The Facebook rot is already setting in, sure it's going to expand a whole lot more, but where it's already reached full capacity people are getting fed up with it. Add to that they still don't really know how to monetise all that traffic without losing the traffic.

Fashion will turn against Facebook and Apple etc... and that's going to really hurt their share value.

Not sure I understand what you're saying in this post. One of the reasons why apple are so successfull is exactly the fact that they have a finger in every part of their verticals. Its not fashion that has made them great, its distinct product design, excellent marketing and smart business decisions (this is coming from someone who has never owned a apple product)

You say the facebook rot is already starting to set in but at the same time say its going to expand a lot more? So how is the rot setting in?! They have barely begun to scratch the suffice on how to monitise facebook and although the market valuation was high, its this potential that has driven this. I dont see this as bubble 2.0 - there is a key difference here and that is the fact that a lot of these companies are starting to generate revenue, something nobody was doing in the first bubble.

Instagram was a rival social network plain and simple, thats why fb aquired them quickly and for a high price - to get them off the table and stop a rival buying them.

 

[fez]

With 30 million users of the app they generate zero revenue.

Its the new business model. I might go to the bank for a loan later to start up a business with the idea "I won't make any money but at some point I will be bought for billions".

 

[Hatter The Mad]

The obscene valuations of various companies such as facebook, groupon and instagram makes me think that we may be heading that way.

A handful of investors or other high-value technology companies valuing a few others a certain way is nothing like a bubble. The valuation and market caps of most technology companies is nothing like a bubble (in fact, even Apple is currently undervalued in my opinion).

It isn't a market bubble until your mother is telling you to invest in the market (or it isn't a bubble until your friends are holding the stock, too).

There isn't even enough data or evidence to suggest things are 'heading that way'.

The only bubble is the 'bubble bubble' - people who misunderstand what a bubble is labelling things a bubble

It's a trend, yes, but it isn't a bubble.

Also, I don't think Facebook is overvalued now and nor will it be come IPO once it has settled down (but I would say this, as a shareholder).

I have read plenty about facebooks valuation and none of it explains why on earth the company is worth so much. It relies on far too many external factors to generate revenue. Users cannot be assigned a value in this context yet that seems to be what the valuation is based on. "If we have half a billion regular users then we must be able to monetise those users when the reality may be that you shoot yourself in the foot when you do so. Social networks rely on a user base which can disappear very quickly.

^ all you have done here is illustrate the things you do not know or understand yet, whereas others do.

That isn't a dig, by the way. Most other people think the same. But if you really think that Facebook is overvalued and you are certain you understand Facebook and the market, take out a short once it floats on the stock market. If you won't take out a short, the only thing that shows is that you know that you don't fully understand Facebook, or trust your judgement that it is overvalued. If you did, shorting it would be printing money going by your book.

Now Facebook can send you adverts dependant on your location.

Never seen the whole big deal with Instagram personally, but i'd expect ad's coming pretty soon.

It already does this. Also, I don't think 'ads' will appear in Instagram, but I do think we'll see 'promoted' stuff in the feed.

basically a web-based Photoshop filtering service for your photo's

It isn't just that. The mistake you and others are making is looking at just Instagram's commodity (the code), rather than from a strategic perspective from a particular company like Facebook.

With 30 million users of the app they generate zero revenue.

Why do you think Instagram*or any company needs revenue to be worth something?

 

[Hatter The Mad]

Spooked by their potential to become a competitor? How so?

Instagram maybe wouldn't become a competitor by itself, but it had the potential to drive media sharing away from Facebook and to other social networks (not just any media, but photos - one of the core value points of Facebook for any social networker and things which keep them in Facebook).

I say again: Instagram isn't just about cross-posting photos with filters. Not only is the user base rate of growth increasing almost daily (30m this week, at least 90m by the end of the year - will bet on it), but user engagement rates are of Facebook levels (ie people who browse the Instagram feed, like things, follow others, common on things). Even businesses were starting to get into Instagram.

Mobile media sharing is Facebook's Achilles heal, and Instagram nailed it.

 

[Hatter The Mad]

Here is a good article and I share its sentiments:

Here is why Facebook bought Instagram http://gigaom.com/2012/04/09/here-is-why-did-facebook-bought-instagram/

 

[Hatter The Mad]

Hmm, but haven't Facebook said they're not going to stop Instagram posting to other social networks... so maybe they were scared of a competitor buying it/going into partnership with them and stopping uploads to Facebook?

Exactly

 

[fez]

@hatter_the_mad You seen to be taking the view that because people value it at 100B that is is worth that. What happened to groupon?

Can you explain to me how facebook is worth 100B because I have read plenty about it and none of it makes any sense to me.

Instagram I can understand. This has happened throughout history. A company buys another that through their existence could damage the companies value or core product. Facebooks valuation relies on the idea that it will grow hugely from its current position which I very much doubt it will do. There are so many stories of web based companies buying another one when it was dish of the day only to be anonymous 5 years down the line.

Myspace bought for half a billion sold for 35 million.

Hotmail bought for 400 million and no one really uses it anymore.

Geocities nearly 4 billion and was shutdown

Ask Jeeves, AOL etc.

I am happy to be wrong but I can't see any hint of it being a good investment.

There is a huge list of companies that were sold for a for kings ransom that have died a death since and never ever lived up to their valuation.

 

[Hatter The Mad]

@hatter_the_mad You seen to be taking the view that because people value it at 100B that is is worth that. What happened to groupon?

Groupon is worth what its market price is today.

Can you explain to me how facebook is worth 100B because I have read plenty about it and none of it makes any sense to me.

I can't as I don't have the time to type it up.

However, consider how Facebook is a platform. It isn't an app or a tool, but a platform. That platform is becoming embedded in everything across the web: from logging into websites, commenting on blogs, even reading news articles or watching Netflix movies.

Facebook's advertising and targeting platform is incredibly immature (weak, in fact) and restricted to the Facebook website. Yet it already pulls in more than a billion dollars of revenue a year.

But also consider the direction that advertising is going in the coming decades and how prevalent it will be on our media (mobile, web, TV). Add to that the smart money in advertising wants to target users. Who, as well as Google who knows your browsing history, is best place to be a platform for targeted advertising and user information - not just on the Facebook website, but across other things (again, like Google Adsense)?

Which other network currently knows what news you read, films you watch, links you share, things you like, your life history (literally), travel plans, travel history, websites you login to, your family, growth of your family, websites you visit, what your opinions are, what you look like, brands you want to be associated with and what things that you share and recommend?

Not just that, but this particular network knows all that about your friends, too. It knows which of your friends influence your friendship groups the most, and which people are most likely to affect your consumption habits (media or otherwise).

Now ask yourself how much all this knowledge is worth to other companies who want to market to you.

Those are just some of the reasons why Facebook is currently worth $100bn, and if it keeps innovating in the platform and advertising space, why there is no reason it wont be hot on Apple's tail in market cap well within this decade.

 

[Hatter The Mad]

But as I said... if you don't think it is worth $108 billion, short it on flotation day

 

[DBT85]

Why do you think Instagram*or any company needs revenue to be worth something?

I don't recall saying that... I simply stated some facts. The facts are that 13 people started Instagram 2 years ago and it has just been bought for more than the market cap of the NYT.

 

[fez]

However, consider how Facebook is a platform. It isn't an app or a tool, but a platform. That platform is becoming embedded in everything across the web: from logging into websites, commenting on blogs, even reading news articles or watching Netflix movies.

All of which are irrelevant to its value. They make no money from that. I use facebook login on sites I build but if it started advertising I would ditch it.

Facebook's advertising and targeting platform is incredibly immature (weak, in fact) and restricted to the Facebook website. Yet it already pulls in more than a billion dollars of revenue a year.

The figures from the past few years show that its growth has peaked and will eventually stagnate. You cannot simply up the advertising and hope that no one
minds. Instead of helping, it may hinder.

But also consider the direction that advertising is going in the coming decades and how prevalent it will be on our media (mobile, web, TV). Add to that the smart money in advertising wants to target users. Who, as well as Google who knows your browsing history, is best place to be a platform for targeted advertising and user information - not just on the Facebook website, but across other things (again, like Google Adsense)?

Google and facebook are entirely different and googles main service lends itself to advertising much more readily. I use facebook to talk to friends I use google to look for products or information. How will facebook transition to T.V. "Soory guys, I know you are watching that show but I want to go and use facebook".

Which other network currently knows what news you read, films you watch, links you share, things you like, your life history (literally), travel plans, travel history, websites you login to, your family, growth of your family, websites you visit, what your opinions are, what you look like, brands you want to be associated with and what things that you share and recommend?

People don't like that about facebook. There is already a feeling they hold too much information and that is while they are not using it in anger. Do that and they could truly scupper themselves.

Not just that, but this particular network knows all that about your friends, too. It knows which of your friends influence your friendship groups the most, and which people are most likely to affect your consumption habits (media or otherwise).

So some people will be labelled "trend setters" and targetted even more. What if people don't like being told that they are simply following their friend Joes suggestions the whole time. When people realise they are being led they may not appreciate it. People are becoming more tech savvy the whole time and are less easy to manipulate than ever before.

Now ask yourself how much all this knowledge is worth to other companies who want to market to you.

Those are just some of the reasons why Facebook is currently worth $100bn, and if it keeps innovating in the platform and advertising space, why there is no reason it wont be hot on Apple's tail in market cap well within this decade.

All of your points seem to neglect the already growing concerns people have about their privacy and information. I cannot see them successfully negotiating all the possible pitfalls of growing to the size they need to in order to justify their valuation.

I may be completely wrong but agreement of their valuation relies on the hope that they can successfully grow their revenues massively and mine says that they won't. Both are massively speculative.

 

[One]

The problem I can see, as it gets more and more popular, is people may just start seeing the effects as passé... when Instagram-ed pics become ubiquitous... then the userbase could move on.

You don't have to apply any filters though, it's just most people do. If it becomes uncool it's still a really nice photo sharing app with a since wall and in the mean time a big threat to Facebook.

 

[buchtis]

I thought Instagram was a porn site?

Unless i'm thinking about something else.

 

[grudas]

i dont like it for one reason - you gotta use their camera app to snap pics and then edit them and upload... id like to edit and upload but i cant seem to be able to do so :/

 

[One]

I've never used it . Is it much better when it comes to basic uploading? I mean, I can easily whack up photos I want to use the Facebook app, or whatever - what's so good about the Instagram one?

You can 'follow' people much like twitter and see photos they have taken in a feed, it's much nicer than reading the **** they talk about, but you are right, if you are just going to be taking normal photos you can just hit the share button for it to upload to fb or twitter. I think you can filter fb wall to just show pictures too which essentially has the same effect as instagram.

I think the buyout as mentioned above is purely to stop the likes of twitter buying it and removing facebook from it. Surprisingly though twitter doesn't actually support it, i.e. if you upload to twitter the photo will actually show in the feed, however with instagram it just gives you a link.

 

[Robbo]

I like Instagram, I think the filters are very good and you can take some very nice pictures with it.

I'm not interested in the Twitter-esque side of things where you follow people and look at their pictures though.

 

[One]

i dont like it for one reason - you gotta use their camera app to snap pics and then edit them and upload... id like to edit and upload but i cant seem to be able to do so :/

You can, click to take a picture then you get the option of either using the camera to take the picture or selecting a picture from your gallery.

 

[One]

I like Instagram, I think the filters are very good and you can take some very nice pictures with it.

I'm not interested in the Twitter-esque side of things where you follow people and look at their pictures though.

What's the point of taking photos though if you never share them? I can remember everything I've seen I don't need photos to remind me, but if I want someone else to know what I've seen I have to show them a photo.