What is so special about Instagram for Facebook to shell out $1 Billion?

The popular photo app, Instagram was bought for a cool $1 Billion by Facebook. Instagram is a popular service and solely exists on mobile phones. It has no revenue model but has a growing legion of users.

Facebook, which has recently filed for an IPO and hence is flush with cash and Instagram which was a rage with iPhone users has recently made the app available for Android.

The fact that Facebook is buying a company that makes no money for a cool billion dollars is going to start floating rumors that yet another dotcom bubble is around the corner.

Whats so special about Instagram?

Instagram is a big social success but on a platform on which no one has really suceeded. Instagram is a service that solely works on mobile phones. It allows people to skim through various filters and share these photos on Facebook, Twitter and Tumblr.

It is gaining a lot of popularity with younger audiences who usually are more comfortable sharing photos from their phones than a slightly older demographic.

Instagram is very personal, as in the photos shared on it are taken by people on their personal mobile phones. So Instagram users end up taking photos of places they visit or see rather than sharing some random online photo.

You cannot have a online social experience without photos being shared among your friends.  Facebook understands that and if Instagram was part of Google+ or Twitter, it would have lost out on a big opportunity. Photos also ensure that people will not quit a service. It is like an insurance policy against your users getting tempted to move to another social platform.

What part did Google have to play in this?

There are some interesting things happening with Google over the past few months. Google has some incredibly successful products like Search, Android, YouTube, Gmail and Chrome. These products until only a few months ago seemed to be unrelated and independent.

But recently it has integrated so many of its services like Chrome app for Android, a renamed Android Market (Google Play) selling movies and books, Google+ spreading its tentacles into every Google product and search becoming more social. Also with a successful mobile OS in Android, it will have tremendous clout in a future, where more people will go online from their phones rather than a computer.

Facebook has now become defensive because to ensure a strong growth rate and also make sure Google does not take away its users. Acquiring Instagram was a wise move as it might block Instagram from Google+. Facebook will also suddenly have a lot of expertise at hand on how to build and attract a mobile only audience. That said, maybe a billion dollars was a bit too much. 🙂

What are your views on Facebook acquiring Instagram? Will it fuel great things for Facebook or will it fizzle like so many acquisitions? Do drop in your comments.

One Comment

Wayne B April 15, 2012

And despite all these read ups, I still am yet to see WHY Mr Zuckerberg pulled out 1 billion US$ for Instagram! It’s just one of those business decisions I will never understand. Oh well, it’s not my money…..it’s not the fact that he bought it, it’s the price tag he paid!