On April 12th of 2012 Facebook, the world’s leading Social Media network, acquired the photo taking, and photo sharing mobile application Instagram for $1 Billion US dollars in cash, and stock assets. Instagram had continued to gain followers as both the number of smart phone users increased, and the spread of photos on social networks. Uploading your newest photos to your Facebook or Twitter page had never been easier, and Instagram saw a continued growth in its popularity because of that. Instagram was lauded, and criticized, for it’s easy use of filters to make simple photos look more polished and professional. Instagram created a whole new culture of amateur photographers, and people were eager to share their artistic side with their friends via Social Media.
During the week of April 3rd of 2012, Instagram was able to raise $50 Million US dollars from Venture Capitalists, valuing Instagram at $500 Million US dollars. 10 or so days later Facebook purchased Instagram for double its value, sending shockwaves through the Internet. Since the acquisition by Facebook, Instagram has been gaining 5 Million new users a week, and have hit the 50 million users mark. Facebook has promised to continue running Instagram independently, quelling fears that it’s purchase would cause the disbanding of the company, and have it’s best parts/programmers stripped and shipped off to other facets of Facebook. Facebook seems to be deploying the method of shock and awe when it comes to dominating the social networking field. Facebook continues to integrate the latest trends in social interactions, to stay competitive, and acquiring Instagram was a mighty blow to their competition. Instagram had been used heavily on Twitter, and they recently created their own online site to allow their users to create a profile. Now that Facebook is their owner, any advances Instagram makes with their online site will be to Facebook’s benefit, and never to its determent.
In a sample of a few hundred Gen-Y social media profiles, shock, and confusion seemed to be the most prevalent feelings. While a lot of Gen-Y members took to Twitter, Facebook, and their own blogs to explain their joy for Instagram, they seemed genuinely confused on 2 main points: 1) Why did Facebook buy Instagram? 2) Why did they pay $1 Billion dollars for it? A decent amount of Gen-Y members sampled mentioned the recent declaration of bankruptcy by Kodak as an example that products or companies have been over valued, and suffered for it. With the estimated worth of Instagram being decided only a week or so prior, it stands to reason that doubling their value would receive double takes. This sentiment continues to be echoed by Gen-Y. How can you come to a price tag on a company that has no real business model? Twitter has been struggling with this issue as of late as well. There is the perceived value, and the physical value, and the number seems somewhere closer to the larger perceived value price tag, much to the chagrin of average Gen-Y members.
The reason for the purchase has yet to be disclosed, though some in the industry attribute it to the location, and check-in capabilities of it’s users, a service Facebook has been strongly pushing on it’s site through various means. Made popular via the Mobile App 4Square, Facebook integrated Check-in into its site, and as a result 4Square continues to loose users at a steady rate. It will be interesting to monitor this acquisition over the next 3-5 years, and see if it was worth the considerable amount of wealth that Facebook placed into it. Gen-Y doesn’t seem to think so at the moment. Time will tell.