When The Social Network 2 is written, I hope the screenwriter won’t pass up the chance to have Mark Zuckerberg explain toSean Parker that “a billion dollars isn’t cool.Spending a billion dollars is.”
Facebook’s announcement Monday that it is acquiring Instagram, a precious mobile app for sharing retro-ized photos has everyone asking, ‘Why would Facebook pay $1 billion for a company with no revenue?”
2. Because it didn’t want a competitor to snap it up first. “It appears that Facebook really wanted to purchase Instagram before another bidder (maybeGoogle) made the deal,” says Loughran.1. Because it could. It’s fairly unusual for a company to drop a cool billion heading into its IPO, but Facebook already has a ton of cash on hand (just under $4 billion according to its S-1 filing) thanks to private share sales to Goldman Sachs, says University of Notre Dame biz prof Tim Loughran. “Facebook, with huge cash on hand, is already acting like a big, publicly-traded tech company,” says Loughran. “Facebook didn’t need to go public first to get the cash to make the major acquisition.”
3. Because Facebook’s mobile app sucks. Instagram’s doesn’t. “Will this deal look cheap in two years?” asks Victoria Barrett. “Probably, if Facebook works on your phone.”
4. Because Facebook is having a midlife crisis, and the acquisition of the beloved, hip photo-sharing app is its equivalent of buying a sportscar. The universal consensus is that Facebook isn’t cool anymore. It’s got wrinkles, or at least many more users with wrinkles. By buying Instagram, Facebook bought itself 30 million hipsters, and all of their wonderful hipster cool.
5. Because most people are on Facebook to look at other people’s photos, and Facebook wants to keep it that way. Now you’ll be able to add all kinds of cool filters to your Facebook photos, a feature that attracted over 30 million people to Instagram. “Providing the best photo sharing experience is one reason why so many people love Facebook and we knew it would be worth bringing these two companies together,” said CEO Mark Zuckerberg. Om Malik at GigaOm translated that as: “Facebook was scared s**less and knew that for first time in its life it arguably had a competitor that could not only eat its lunch, but also destroy its future prospects.”
6. More data. Which translates into better mobile ads. Techie Robert Scoble argues that Instagram has a better idea of what its users are doing and what they like doing. “If you are a skiier, you take pictures of snow and skiing. If you are a foodie you take pictures of food at high-end restaurants. If you are into quilting, a lot of your photos will be of that,” writes Scoble at Quora. “Facebook’s databases need this info to optimize the media it will bring to you. This data is WORTH S***LOADS! Imagine you’re a ski resort and want to reach skiiers, Instagram will give them a new way to do that, all while being far more targeted than Facebook otherwise could be.”
7. Because it wanted to buy soul. Facebook has become a huge, money-making behemoth, which makes it very attractive to investors but makes it slightly harder to take Mark Zuckerberg seriously when he waxes poetic about the Hacker Way. The users of Instagram are still enamored of their little app, so much so that they feel outraged about it selling out. “Facebook bought the thing that is hardest to fake. It bought sincerity,” says Paul Ford at NYMag.
8. Because it’s cheaper than inventing a time machine. “Before Instagram, if I wanted my pictures to look like they were taken in the ‘60s, I’d have to invent a time machine and travel back 50 years,” said one of the Daily Show’s “youth” correspondents.
9. Because it wanted an upscale version of Facebook to keep the digital upper class happy. Just as Williams Sonoma created West Elm for those who turned up their noses at Pottery Barn, Facebook needs a place where its users can hang out where they won’t run into the “technological laggards.” “Facebook is not the preferred destination or permanent mailing address of the digital upper class,” writes Carles at Grantland. “While Facebook became one of the most valuable sites on the Internet by allowing mass-market audiences to participate in ‘life’ as we now know it, it is still under the threat of becoming an impersonal experience without constant innovation that is aimed at making users feel like they are building something meaningful as they upload their ‘lives’ to the social network. Being on Facebook just doesn’t make you feel like a VIP.”
But being on Instagram does, in part because it has been the exclusive provenance of iPhone users for so long. When it finally released a version for the Droid, I snapped it up immediately.
10. Because it’s scared. “Young hot technology companies are nothing if not aware of their mortality,” write Nick Bilton and Somini Snegupta at the New York Times. “Because so many started out by wounding an older tech giant, they know they can be killed, or at least severely injured, by that which lurks in the rented office space of Silicon Valley — an even hotter, younger technology company.”
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