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."
Re:Nope. (Score:5, Interesting)
I see it the complete opposite. Instagram was last month's "words with friends" or "draw something" or "pintrist" or whatever. It was the obsession-of-the-moment for the barely-computer-literate, and from a completely anecdotal point of view, I've seen its popularity drop off tremendously in just the past few weeks. I used to see it all over my wife's tumblr feed and my facebook, and now it's showing up way less often. the new obession-of-the-moment are these creepy animated gifs apparently, that only show like 12 frames at a time of a movie or tv show. I don't get it, but then, I guess it's not "for me".
Facebook on the other hand, for all the complaints it always garners, appears to be going as strong as it ever was, at least as far as I can tell. If there's something new and more popular on the horizon for all the tweens and children, I haven't heard about it yet. That said, FB seems to be constantly slightly reinventing itself successfully every 6 to 12 months, adding some new feature or some new integration to keep its users interested for the next little bit. I don't know if it's Zuckerberg or his underlings doing it, but there's a pretty intelligent hand directing that company (well, perhaps not their mergers and aquisitions dept). I don't see FB going anywhere for a good while yet.
I'm not saying I'd buy stock in it of course.
A Forbes cover? Wow (Score:4, Interesting)
Well I think we all know that a making the cover of a business magazine [forbes.com] is pretty much the guaranteed path to a bright future in the internet startup world.
Re:Like any sane person... (Score:5, Interesting)
I said this back when the deal happened.
$1B for a service used by self-absorbed 'hipsters' to take photos of food and who pay nothing for it? Nuts!
You might be surprised how much of a service economy is run by self-absorbed hipsters.
With young people it's paying extra for things like Apple hardware when equivalent or better alternatives are cheaper. Apple has built significant brand loyalty among these people because they know how to market. Facebook is like a well known brand name, except it's an even more efficient way to get lots of attention while doing nothing particularly significant.
WIth old people it's being waited on to feel served and important. They'd rather stand in line at a service counter even if what they want is trivial, even if it means waiting longer than it would take to do it themselves, even if they are able bodied and what they want done requires no skill. They seem uncomfortable dealing with younger folks as equals and feel a need to be in some kind of situation of authority, "customer" being the most readily accessible. They'll try to force waitstaff to listen to stories about their grandkids etc. because they assume random strangers give a damn, and in short they just love a captive audience not allowed to refuse.
Both are responsible for a large amount of business. Both are not being terribly rational. They are just catering to and trying to satisfy either the attention Daddy never gave them or the fact that they have no friends. You think the recession is bad, remove these elements and it'd be even worse but beware of the broken window fallacy.
Re:Nope. (Score:5, Interesting)
To me it's more like Facebook is grasping for relevance by purchasing Instagram. Facebook will fade out while Instagram will continue to gain popularity.
This is somewhat insightful but takes more explanation.
I'm technically a "user" of linkedin. I haven't logged in for at least a year or two. Its impossible for linkedin to monetize me. I don't look at their site and incoming emails from them go to the spam folder. The same thing happened to me with facebook. Initial rush of friending and impressing people I don't know or care about. Then boredom sets in. Finally I stop logging in. At this point FB can no longer monetize me. Eventually I deleted my FB not because I was using it and deleting was making some kind of political or privacy point, but because I was no longer using it so it made no point to keep it around any longer as a insecurity vector etc.
On the other hand a pic sharing site only exists as its used. Unlike linkedin, I can't say I'm a instagram user unless I'm logging in and having advertisements shoved in my face (well, if I haven't been using an ad blocker since the 00s, anyway). Like reddit or 4chan or /. or a blog, I guess, all the viewers are viewers, not just dead unused accounts.
Or the medium length version is Linkedin / FB / G+ can have millions of "users" who never get spammed because they never log in, but ALL instagram viewers inherently are spamable.
Its kind of like how a chicken has a distant relationship with my breakfast, but a pig is 100% committed to my breakfast. The chicken can always lay another egg, or not, whatever. The pig however is fully and permanently and forever involved with my bacon.
Re:Like any sane person... (Score:5, Interesting)
Very good post AC you should post under your own name to get modded up.
Your analysis of the customers is spot on with the exception that both your example have immense capital investment to keep competition away and they actually run a profit.
In example 1 Apple could be displaced merely by spending a trillion or so, but realize they earn a profit on each device.. Chinese slave laborers and political prisoners make a device and charge apple $180 or whatever, they turn around and sell it for $600. Hard not to make money in a market like that.
In example 2 your apparent restaurant could be competed against by anyone with $1M to construct a building, pay off the zoning commission, hire staff, advertise, buy cookware and food to cook, utilities, etc. Even so, the cost to the provider of a cup of coffee is 15 cents and they sell it for $1.99. Hard not to make money in a market like that, assuming volume is high enough.
So what stops a neo-hipster from replacing instagram as the new hotness. Well, I can register a domain for $5 and cloud host on amazon or competitors for next to nothing, being more creative than instagram can't be terribly difficult, and there seems to be no way for them to earn a profit. They're screwed.
Re:Nope. (Score:5, Interesting)
A buddy of mine works as a social media consultant. He went to a high school and asked the students which social networks they used. Tumblr and Twitter were the most popular and most of them no longer used Facebook.
Facebook's stock is down. Several major companies have declared they're abandoning Facebook advertising. One company claims they have evidence that most clicks of Facebook ads were by bots and that Facebook refused to allow them to change the name of their page unless they upped their advertising by $2,000 a month.
Last year Zynga was the popular company that everyone declared the future. They were going to surpass EA, except now they're in the toilet. Casual social games was the second most popular activity on the internet last year (behind checking email) and it has already given way to mobile gaming. Zynga's success fed Facebook's success in generating tons of new pageviews. As social games are declining, so are Facebook pageviews.
Facebook is not as strong today as it was last year, and I doubt it will always remain the most popular social network.