Forbes Likens Instagram Purchase To Myspace Deal 105
theodp writes "It's not that Chunka Mui isn't impressed by the smarts of Instagram CEO and Forbes cover boy Kevin Systrom. Still, Mui can't help but ask, 'How Long Before Facebook Writes Off Its $1B Purchase of Instagram?' While pundits and analysts have almost universally praised Facebook's acquisition of Instagram, Mui is less-than-impressed by Instagram's 80 million unmonetized mobile users. 'My prediction,' writes Mui, 'is that we'll look back on the acquisition as a bust — much in the same way we now view News Corp.'s purchase of Myspace, AOL's purchase of Bebo, and Excite@Home's purchase of Blue Mountain Arts.' Ouch. Mui notes that according to a recent SEC filing, Facebook could ditch the deal by paying a $200 million fee if regulators block the merger or if Facebook terminates the agreement after Dec. 10, 2012."
Nope. (Score:2, Insightful)
Not supposed to make money (Score:5, Insightful)
Clearly the acquisition of Instagram was a defensive move in the social networking space - it was starting to build a market that would otherwise chip away at Facebook - and you'd think they learnt their lesson from letting Twitter grow into a competitor
So, of course, you'd expect it to get written-down as just enough functionality is incorporated into Facebook to ensure another competitor doesn't pop up in the same "social photo" space. But also expect them to let it die a slow death (rather than shut it down) to maximise the defensive value of the acquisition.
Gee, you think? (Score:5, Insightful)
In what universe was this considered a good deal? How on earth does a company that lets users take chintzy photos with a fake aging filter worth 1000 million dollars?
There's nothing that makes Instagram a natural monopoly : at least with facebook itself, the vast userbase it has makes it a de-facto monopoly. (just like there's only space in front of your house for one power company and one set of roads, there's only time for you to put inane status updates on one social networking site).
And, worse still, Facebook doesn't have the deep pool of genius level talent like google, so it's entirely possible that Facebook will not STAY on top. But at least it has most of the user base for social networking, and people use it to get stuff done. Instagrams an internet fad that gives the product away for free.
Shit...for a cool 1000 million, facebook didn't even get a deep talent pool of genius level software engineers. They bought themselves a whopping 10 or so employees. No matter how skilled, 10 folks isn't worth that kind of scratch.
Re:Nope. (Score:5, Insightful)
creepy animated gifs apparently, that only show like 12 frames at a time of a movie or tv show
Well, think of it like a fake ageing filter for the purely digital realm. You take a perfectly good image sequence from a movie then "age" it to make it look like it would in 1996, by using a 256 entry pallette and a limited number of frames.
In that way, it's just like the instagram it replaces.
Re:Nope. (Score:4, Insightful)
I'm not sure your (or my) Facebook use is entirely typical. At least their last two quarterly reports suggest that they're still increasing monthly active users by the truckload. That's not just new sign-ups. So overvalued? At like a 115 P/E, absolutely, unless they can find a good way to start making real money in mobile. I don't see the whole service falling off the MySpace cliff of irrelevance any time soon, though.
Instagram I never really understood. I suppose facebook could use it to boost their oft-maligned mobile app and roll the addicted users into the fold. Maybe. I don't know if it could pay off to the tune of a billion dollars though. At least it puts all that content inside their gates, for whatever that's worth.