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Why did Facebook pay one billion dollars for Instagram?

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The geeky side of the internets is all a flutter over Mark Zuckerburg’s status update with news that Facebook is purchasing Instagram for one billion dollars.

1,000,000,000. I had to double check with Google to confirm how many zeros are in a billion (not Bing, zing!).

Ok, so I kid. Regardless, one billion dollars is a heck of a lot of dough. So why would the Zuck and Facebook pay that much (in cash and FB stock) for an app that is solely for photo sharing and has a measly 30 million users (nuthin’ compared to FB’s 800 mill)? That’s the question many of us are wondering, so let’s take a look at the speculation.

Why did Facebook pay one billion dollars for Instagram? Five reasons for you to mull over:

1) For the app technology
Highly unlikely. Why? For a multitude of reasons. It would be silly to assume that Facebook couldn’t hire rockstar developers or use a handful of their 3,000+ employees to come up with a comparable solution. Oh wait, THEY ALREADY DID! Raise your hand and click if you remember Facebook’s “Instagram Killer” from June of 2011. Not ringing a bell? Check out TechCrunch’s leak, complete with a breakdown of the app and mocked screenshots. Maybe the app never made it to full-blown development. Who knows. They obviously scrapped it somewhere along the line. But it is/was possible for them to do it on their own without Instagram. Even if they didn’t have that attempt, they could’ve paid for it. They could’ve made it for roughly $1 million. So if the technology was the primary reason for the the record-breaking purchase, it’s a really bad one.

2) For the API
And now I’ll contradict what I just said, sorta. Facebook didn’t buy it for the technology, per say, but I bet a Instagram’s solid API factored into the reasoning. Since it was released in February, several platforms have tapped into it. That open API opened the doors for greater threats to Facebook.

3) For Instagram’s users
Yes and no. Facebook just paid $33 for each and every Instagram user. That’s a lot of money when you’re the world’s largest social network. It’s better to say user data was factored into the purchase, but not the primary factor.

4) To say that they bought Instagram
Yeah, it’s pretty badass to say you bought hip and hot Instagram. And for Facebook with is slipping “cool” factor, this is important. They paid one billion dollars for the brand, for sure.

5) To squash potential threats and fold it into Facebook
Ah huh. Zuck was scared silly of Instagram’s possibilities. Facebook’s evolution brought it to photo sharing and it’s one of the most popular uses of the service. Unfortunately, it hasn’t been able to get up to speed in the one area it needs to in order to survive, that being mobile photo sharing. So Facebook purchased the hottest thing in mobile photo sharing. It may not be the best way or reason to spend one billion dollars, but Zuckerburg surely recognized that if he didn’t hop on Instagram soon, he might never have the chance to again.

What say you?

Comments(2)

  • April 11, 2012, 8:49 am  Reply

    I think it’s all posturing for the IPO. There can’t be anything else on Zuck’s mind right now, so why else? He’s likely more threatened by Pinterest than by Instagram, so I thought it was an interesting choice to pursue them. Then again, this could have been going on behind the scenes prior to when Pinterest hit the big time in 4Q last year.

  • April 11, 2012, 11:02 am  Reply

    Yes, you’re spot on by pointing out the IPO. I neglected to mention it and I’m sure that was a major factor. Concerning Pinterest, I think Zuck opted for Instagram because IG can be easily incorporated into the Facebook platform whereas Pinterest is an entirely different way of sharing. Pinterest is also becoming a hot bed for spam and has a lot of issues to work out with copyright infringements etc., i.e. more headaches for Zuck. But like you said, I’m sure he’s still got to be lusting after it. A platform he wants to conquer, for sure!

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