Today, there was “before the announcement” and “after,” referring of course to Facebook’s midday billion-dollar acquisition of 351-day-old (young?) photo sharing app Instagram. Many are hung up on the financials, and it’s not hard to understand why. $1 billion isn’t the largest amount of money to pass hands in a transaction like this, but as L2 founder and CEO Scott Galloway explains, it might still be a record-setting deal:
“Instagram only has about a dozen people, which could make this the largest acquisition (by value/employee) ever,” says Galloway, also a professor at NYU’s Stern School of Business. “This could signal a scary trend that the internet is creating a massive amount of wealth for a small number of people and eliminating jobs along the way.”
But while that is very true and something to pay close attention to down the road, it’s also important to look at why Facebook chose to pursue Instagram over so many other photo-sharing platforms. And why now. Maureen Mullen, L2’s Research and Advisory lead, sheds some light: “Instagram was able to reach scale through one operating system (IOS) because of some of the tremendous power of network effects. It took Flickr two years to reach 100 million photos; for Instagram, only eight months.” Also, as Mark Zuckerberg explained today in his lengthy status update on the acquisition, Instagram is visually and functionally a natural fit for the Facebook family. Galloway agrees. “Facebook’s focus on a core strength such as photos makes sense as their aesthetic strength — clean, visual, design — makes the platform the first ‘aspirational’ web media property.” He also points out that the acquisition will help Facebook “tap into media dollars of luxury brands that have been reticent to advertise in the medium.”
Only time will tell how this exciting new relationship will develop, but from all accounts it seems like everyone except for Instapaper, Hipstamatic and Flickr had a really good day.