Facebook buying photo-share app Instagram for $1 billion

Instagram - 8

Instagram - 8 (Photo credit: BrentOzar)

Facebook is spending $1 billion to buy the photo-sharing company Instagram in the social network’s largest acquisition ever.

On the surface, that’s a huge sum for a tiny start-up that has a handful of employees and no way to make money.

But the lack of a business model rarely dampens excitement about hot tech upshots these days. As Facebook has shown, itself without ads or revenue in its early days, money goes where the users are.

Instagram lets people share photos they snap with their mobile devices. The app has filters that can make photos look as if they’ve been taken in the 1970s or on Polaroid cameras. Its users take photos of everything from their breakfast egg sandwiches to sunsets to the smiling faces of their girlfriends.

In a little more than a year, Instagram attracted a loyal and loving user base of more than 30 million people. Apple picked it as the iPhone App of the Year in 2011.

Instagram’s fans, brand recognition and its potential are difficult to put a price tag on. Yet Facebook has and can afford it. The company is preparing for an initial public offering of stock that could value it at as much as $100 billion in a few weeks. What’s $1 billion? A drop in the bucket, really.

“Facebook after this IPO is going to be in a position to be predatory. They can make sure no one steps in their way and buy anyone who gets in their way,” said Wedbush analyst Michael Pachter, who follows social media.

Buying Instagram, he added, not only eliminates a rival but gives Facebook the technology “that is gaining crazy traction.”

Facebook is paying cash and stock for San Francisco-based Instagram and hiring its dozen or so employees. The deal is expected to close by the end of June.

It’s a windfall not just for Instagram’s employees, but the venture capital firms backing the company. Last week, Sequoia Capital led an investment round that valued Instagram at $500 million, according to a person familiar with the matter.

Going by the $1 billion price tag, Facebook is paying about $33 for each Instagram user. That’s a fraction of the $118 that Facebook investors will be paying per Facebook user if the company gets its expected $100 billion valuation after going public. By that math, Mr. Pachter said, $1 billon “doesn’t sound crazy.”

Getting Instagram is a big win for Facebook as it works to harness people’s growing obsession with their mobile devices and sharing every moment of their life. The company’s own mobile application is not as easy to use as Instagram, and sharing photos can be downright clunky. Facebook’s way, noted Mr. Pachter, has always been to buy technology if it’s better than what it can build on its own.

Facebook, which is based in Menlo Park, California, said it plans to keep Instagram running independently. That’s a departure from its tendency to buy small start-ups and integrate the technology or shut them down altogether just so it can hire talented engineers and developers.

“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,” CEO Mark Zuckerberg wrote on his Facebook page on Monday announcing the deal. “We don’t plan on doing many more of these, if any at all.”

“We think the fact that Instagram is connected to other services beyond Facebook is an important part of the experience,” Mr. Zuckerberg said.

Source: http://www.thehindu.com/sci-tech/internet/article3299305.ece

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About Admin

Vikram is an experienced communications professional with over 17 years of expertise in growing, managing and defending leading brands’ reputation across industry sectors in traditional media and digital environments. With his strong background in media and integrated communications, he drives impactful communications strategies that contribute to a company’s strategic objectives. He has held key positions at Tata Housing, Adfactors PR, Sampark PR, The Resort and Indian Express Group. He also had his share of entrepreneurial experience of publishing and editing a maritime weekly – Shipping Today for over 7 years. Vikram has managed corporate, crisis and product PR and has actively interacted with almost every type of media across the length and breadth of our country. He has managed communications campaigns for large and mid-size companies in B2B & B2C space, across sectors such as Technology, Education, Real Estate, Infrastructure, Shipping, Logistics, Finance, Media etc. He has counseled at the highest levels as well as sorted things out at street level for top brands including Tata Housing, Aptech, 3i Infotech, Oracle Financial Services Software, BMC Software, Rolta India, ICICI Prudential Life Insurance, ICICI Lombard General Insurance, Bharati Shipyard, Mumbai SEZ, Ybrant Digital and many more. Vikram enjoys wide industry recognition as an expert on emerging media technologies and public relations. Vikram writes extensively on PR, social media, marketing and branding. A prolific blogger since 2004; his blog, Vikypedia.in is India’s most read PR blog. Most notably he has also founded Indian PR Forum, India’s largest online forum of PR professionals. He is passionate about sharing his knowledge on PR and Social media through lectures at various communications institutes across India and by also speaking at various industry forums, events & seminars. Vikram holds a Master’s & Bachelor’s degrees in Journalism and Mass Communications. He has been honored with Y Imagine Excellence Award - “Best Young PR Professional of Year 2011” by Young India Communicators Forum (YICOF), Hyderabad, 5 individual awards at Tata Housing and 2 awards at The Resort for various communications related initiatives. His interests include his family, photography, travelling, of course, blogging. Vikram can be reached via email at pr .vikram@gmail.com or on social hubs like About.me, Twitter, Facebook and LinkedIn.

Posted on April 10, 2012, in News Updates and tagged , , , , , , . Bookmark the permalink. Leave a comment.

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