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Once Mocked, Facebook's $1 Billion Acquisition of Instagram Was Genius (bgr.com) 105

Posted by EditorDavid from the finances-of-photo-sharing dept.
anderzole writes: "In April of 2012, Facebook shocked the tech world when it acquired Instagram for $1 billion," reports BGR. "At the time, the acquisition raised quite a few eyebrows, along with many more questions than answers. Not only did people wonder how Instagram would fit into Facebook's existing business, many also questioned if Facebook CEO Mark Zuckerberg had lost his mind by outlaying $1 billion for a company that, at the time, had no revenue." Nearly five years later, Facebook's Instagram acquisition "not only looks like a bargain, but a full-fledged stroke of genius."

Today Instagram still shows no signs of slowing down. Instagram's active user base jumped from 500 to 600 million in just the last 6 months alone, marking its fastest growth rate ever. "Incredibly, Facebook saw the long-term potential and impact of Instagram and managed to swoop in and acquire the company long before its user base began to accelerate wildly," writes BGR. "From an economic standpoint, Instagram is already paying dividends via highly targeted and lucrative ads. During the first quarter of 2016, for example, it was estimated that revenue from Instagram checked in at $572.5 million and accounted for 10% of Facebook's overall revenue. In fact, analysts at Credit Suisse believe that Instagram will have delivered $3.2 billion in revenue for Facebook by the time 2016 comes to a close. That's not bad for a $1 billion acquisition that Facebook is still in the relatively early stages of monetizing."
Instagram was also the second-fastest growing app of 2016, increasing its user base by 36% in just 12 months.
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Once Mocked, Facebook's $1 Billion Acquisition of Instagram Was Genius More

Once Mocked, Facebook's $1 Billion Acquisition of Instagram Was Genius

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  • i need to get all of instagram's domain names and add them to the list of addresses for my hosts file to block

    • Didn't you hear? Whiplash sold Slashdot to Facebook a few days ago. You should add that to your hosts file too.

      At least then we wouldn't have to read about your off topic posts on the state of your hosts file, and the fact that you have been living under a rock this year.

  • Before abandonment. (Score:1)

    by Anonymous Coward

    is still in the relatively early stages of monetizing.

    i.e. they haven't pissed off their userbase enough yet. Nothing on the internet follows a linear growth curve forever. Remember AOL? MySpace?

    Facebook is suffering from its own success. It's now a cesspool that has combined 'forwards from Grandma' and the Eternal September. Read the comments on any 'news' story. Worse is most people will say that with their real name attached.

    • Re: (Score:1)

      by Anonymous Coward

      Instagram is becoming the new Twitter. It has better photo sharing than Twitter, better video support, and it allows for longer messages to be posted. As people flee the sinking ship that is Twitter, they're fleeing to Instagram.

      Which would have nothing to do with what you posted, except...

      i.e. they haven't pissed off their userbase enough yet. Nothing on the internet follows a linear growth curve forever. Remember AOL? MySpace?

      They're benefiting from Twitter pissing off their userbase by both censoring too much and not enough (different halves of the userbase, but it adds up to the whole). And then the process will repeat, as the same people th

      • And then the process will repeat, as the same people that ruined Twitter flock to Instagram.

        Yes. Instagram is the new Twitter. How long before it becomes the new old Twitter?

        Of course, if the Credit Suisse estimate is anywhere close to correct, then Instagram has returned more than 3x revenue over the acquisition cost. No idea what part of that is net profit (and can't be bothered to try to figure it out). If Facebook continues to milk Instagram until it starts to crash, and then reduces costs aggressively, that $1B outlay might well turn out profitable (if it isn't already).

        I admit I was dubious

    • I agree. Wait, this isn't Facebook, my bad.

    • How is it valuable (Score:5, Insightful)

      by goombah99 ( 560566 ) on Sunday January 01, 2017 @02:36PM (#53588791)

      One billion pictures of what people ate for lunch may have information content but is it valuable?

      • Re: (Score:2)

        by ark1 ( 873448 )
        I'm sure food advertisers would like to know what people are eating.

      • Re: (Score:1)

        by Anonymous Coward
        It's worth $3.2 billion if Facebook can convince advertisers to pay them $3.2 billion for showing ads next to one billion pictures of what people ate for lunch. Which they apparently did. The world is a weird place.
      • Yes, because you left 'valuable' undefined. There will always be some value to 1 billion individual photos of lunch, depending on your goals.

      • Training data for neural networks.

  • instagram is nothing more than a 21st century version of the 20th century celeb magazines in the supermarket checkout lane. only difference is the cost of entry is low where anyone can build a small following posting non-stop selfies and other photos to sell yourself.

    • Re: (Score:1)

      by Anonymous Coward

      So it's the same thing, only totally different! I like this game, grandpa!

      Google is nothing more than a 21st century yellow pages, only it's easier to use and gives back different kinds of information.
      Podcasts are nothing more than 21st century serial dramas, only anybody can do them and they cover different things.
      Uber is just like the 21st century version of taking an ocean cruise, only there's no boat and you don't actually go anywhere.

    • That sounds like a huge money-maker, actually.
      If you have any more ideas like that, let me know :)
    • https://youtu.be/1lsn2tT5yTc [youtu.be] says a lot on the subject for a song.

    • You could have just written: "I have never used Instagram and I have no idea what I'm talking about". It would have been much shorter.

  • And people thought that the Smalltalk post read like an ad. There's no use for articles only interested in only covering the upsides to a situation.

    • Re: (Score:2)

      by SirSlud ( 67381 )

      Are you incapable of reading more than one article on a given subject?

      • There are time pressures. But some articles fail to present any indication they are worth reading and one way they do so is a failure to be able to apply critical analysis of the subject matter.

  • 119999900% growth? (Score:2, Funny)

    by Anonymous Coward

    From 500 to 600 million is a factor of 1.2 million!

  • Selling eyeballs (Score:1)

    by Anonymous Coward

    "Instagram is already paying dividends via highly targeted and lucrative ads."

    Remember when businesses used to make money by offering something of value to customers?

  • ChickenOrEgg (Score:3)

    by sdinfoserv ( 1793266 ) on Sunday January 01, 2017 @02:12PM (#53588685)
    Seems more like a "Which was First" type scenario. Would have Instagram have increased its user base if not for Facebook? I doubt it. It’s really less about “genius” and more about what FB can do with 1.2B users.

  • Relative (Score:5, Insightful)

    by c ( 8461 ) <beauregardcp@gmail.com> on Sunday January 01, 2017 @02:19PM (#53588723)

    Even if it was a total flop, a $1 billion flop would still look brilliant compared to Microsoft buying LinkedIn... or Microsoft buying Nokia... or... Microsoft buying aQuantive... or... well, whoever ends up actually buying Yahoo, because even Microsoft learns from their mistakes.

    • Re: (Score:2)

      by SirSlud ( 67381 )

      Microsoft just bought LinkedIn. It's ironic that you'd make such a comment given how this article is about people who said the exact same thing when FB bought Instagram.

      • Re: (Score:2)

        by c ( 8461 )

        It's not so much that they bought LinkedIn... it seems kinda dumb, but okay, sure, sometimes you need to move out of your comfort zone.

        But $26.2 billion? In USD, not Z$?

        Understand that I'm not really singling Microsoft out here... I'd question *any* company that dropped $26.2 billion on LinkedIn.

    • aQuantive absolutely, Nokia probably (though they got access to a lot of tech to help their devices division for future), LinkedIn remains to be seen, they also said the same thing for Skype which so far has been very successful for them. There is also a large difference between facebook and Microsoft though, Microsoft have large bundles of offshore money that really can only be spent on acquisition's and even an overpriced acquisition is better than bringing the money back and paying tax on it. Facebook at
  • Comment removed based on user account deletion

    • FB certainly could have replicated Instagram for a lot less than a billion dollars. What they've done with it since the acquisition doesn't change that fact.

      Well you certainly missed the point. FB's acquisition of Instagram was not so much about the technology; it was about the users. Sure FB could have developed a clone of Instagram but what they really wanted were the users.

      • Are there numbers on new Instagram users who are not already users of FB and vice versa? That would be a meaningful metric because simply showing the same ads to the same users on multiple interrelated platforms isn't a great value nor a great success.

    • > FB certainly could have replicated Instagram for a lot less than a billion dollars

      Maybe. Microsoft tried to build a social network and failed (so.cl). Google tried and failed (Google+). Facebook did manage to build one social network successfully, but there's little certainty that they could build another one and have success.

      As someone else said, they could build most of the SOFTWARE the powers the site for several thousand dollars, but that's not where the value is.

  • ... that instagram and the entertainment social networks have peaked and will now start to decline. Unlike past inventions like email, instagram's, and to a lesser degree, facebook's, utility is limited. I have unfollowed almost everyone on my facebook feed and haven't posted on my wall in weeks, although I still occasionally comment on other posts. Having experienced that feeling I don't plan to go ever go back.

  • Comment removed based on user account deletion

  • What's instagram? Is that another photo-sharing site that lets you tag and comment, like tumblr, myspace, pinterest, facebook, flickr, deviantart, shutterfly, smugmug, snapchat, twitter, wordpress, snapfish, and blogger? Well, I am sure it is unique and valuable.

  • It's not "many also questioned if Facebook CEO Mark Zuckerberg had lost his mind by outlaying $1 billion for a company that, at the time, had no revenue". It's because this is Facebook, and no one wants Facebook to acquire Instagram except Facebook and Instagram themselves.

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