Posted by Dale Crower on April 9, 2012 - 10:59pm
Facebook and free photo sharing application Instagram announced a deal today where Instagram would be acquired for $1 billion by the mighty social network in cash and stock. Instragram has only been around since March 2010, and although skyrocketing in users, really has no business model to date and no real revenue to speak of. The company only has 13 employees and, although has lots of traffic, is in a saturated marketplace - there are lots of photo sharing applications, Flickr, Photobucket and Hipstamatic to name a few.
Is Instagram worth $1 billion, probably not. Yahoo acquired Flickr for $37 million in 2007, however, Google acquired YouTube way back when for $1 billion and everyone scoffed and it's looking like the long-term play is going to work out for Google, but again, YouTube was a market leader and Instagram arguably is not, but maybe it is now since it's joined what's becoming the "dark side" with Facebook. Is Facebook's Mark Zuckerberg probably just a little over-agressive with his first "big" acquisition, which after their upcoming IPO, will be one of many? Probably so, but perhaps old Zuck understands something we don't. After all, the $1 billion price tag is only 25% of Facebook's cash on hand and they're about to get a whole bunch more with their IPO. Perhaps he sees something we don't see, like he did with Facebook itself.
One thing is for sure, with being able to work for only two years and bring in a $1 billion price tag, a bunch more newby entrepreneurs just got inspired and told their parents they are dropping out of Harvard and are moving to Silicon Valley to start social media applications. The scary thing of it is, some of them will make it.
Is Instagram worth $1 billion, probably not. Yahoo acquired Flickr for $37 million in 2007, however, Google acquired YouTube way back when for $1 billion and everyone scoffed and it's looking like the long-term play is going to work out for Google, but again, YouTube was a market leader and Instagram arguably is not, but maybe it is now since it's joined what's becoming the "dark side" with Facebook. Is Facebook's Mark Zuckerberg probably just a little over-agressive with his first "big" acquisition, which after their upcoming IPO, will be one of many? Probably so, but perhaps old Zuck understands something we don't. After all, the $1 billion price tag is only 25% of Facebook's cash on hand and they're about to get a whole bunch more with their IPO. Perhaps he sees something we don't see, like he did with Facebook itself.
One thing is for sure, with being able to work for only two years and bring in a $1 billion price tag, a bunch more newby entrepreneurs just got inspired and told their parents they are dropping out of Harvard and are moving to Silicon Valley to start social media applications. The scary thing of it is, some of them will make it.
Comments (2)