Instagram ?

[jstoddard]

Dick - this is for you... but anyone feel free to jump in.

I'm really NOT getting the valuation of Instagram. My daughter uses it and likes it .

So you can apply filters to your photos that make them look old or whatever... you can do that with 100,000 (literally) other picture apps out there... and so you can "share them with your friends". Ok - you can do that without Instagram about 1001 other ways as well. They claim to have 30,000,000 users. Nothing to sneeze at, but Yahoo's Flickr (for example) posts similar numbers and offers a lot more core USEFUL functionality. It was purchased for $35M not $1B

It seems to me the unique selling prop. of Instagram is user laziness - Instagram show up and combine two things that you can already do in any number of other ways - but they build a huge user-base on convenience. Users = potential ad or other data dollars, so they're suddenly worth a pile of money to Facebook. Or are they?

A company 2 years old with 13 employees, no real product roadmap, and no physical assets to speak of is worth $1B ??

There were some really really stupid acquisitions during the last dot-com bubble - but I thought everyone learned their lessons.

Or is Facebook nowhere near as bright as I've been giving them credit for being?

JLS

[Ohiobuilder]

Instagram just recently became available to the Android phones so I have just started using it.

I think it boils down to how easy and convenient it is. The last thing I am is lazy - I just don't like wasting my time with too many steps. Show me a way to eliminate a few steps to achieve the same outcome and I'll be on it. I think the Instagram kids just built a better mousetrap.


Not sure what selling something like this for a Billion means? Is there a closing and the wire transfer a Billion dollars to my account?

[SpecBid]

Being that you are able to follow other Instagram users most likely contributed to what they paid. FB is in the position to eliminate any product that can potentially compete as a platform.

[SpecBid]

and lets not forget, no revenue model, at all. With virtually no way to monetize any aspect of the app.

[JayNos]

I'm 27 and don't understand Instagram's appeal. Granted, a bunch of my friends love it. Buying Instagram was a smart move for Facebook. Instagram has a better photo sharing system (even without the stupid filters) than Facebook. It's easier to use and, I believe, instantly upgrades your photos. It also has a comment section on photos (similar to facebook) and the Twitter style tagging of others. It was starting to pull traffic away from Facebook in some instances. A friend of mine in Braddock is not on facebook, but has a strong community of friends on Instagram. I imagine there are a lot of people like him.

The 1 Billion dollar valuation isn't clear to me. I would have thought that Facebook could get it for half that, but maybe Instagram held out. In the end, this will turn out to be a smart move by Zuckerberg.

Instagram might be perfect for a remodeler if their clients were using it. Take 2-3 job photos a day and they instantly show up in someones feed. No need to load up facebook. Also might start more conversations since Instragram is only about photos.

[Dick Seibert]

Joe:

I recently asked my customer about Instagram since his Board of Directors is negotiating to sell his company, saying that if Facebook paid $1 billion dollars for Instagram they ought to pay $100 billion for his since he is involved in branding and making money. He said Zuckerberg is totally unpredictable, he has no idea why they paid that kind of money, that it's crazy.

[jstoddard]

I'm sure they can find a way to monetize it Chris.. any time you have 30 million anybody doing anything on a website you're generating data of some kind - and that alone has some value. Tracking products in photos uploaded for example. Or -just making FaceBook "stickier" has value - if Instagram users hang around and play Farmville or whatever - that's valuable too.

Maybe not $1B worth - but something.

I think you're on the right track re: buying potential competition - but by that thinking they should have purchased Pinterest too (if it was for sale).

JLS

[jstoddard]

Don't disagree with any of that - other than you can do a lot of stuff with a billion dollars. for $1B Facebook could have written their own Instagram, crushed the actual Instagram with their version, and still have had $950,000,000 to use for something else.

JLS

[Dick Seibert]

Joe:

Once Facebook becomes a responsible publicly traded company more rational decisions will be made, in the meantime it's good for us flooding our area with more millionaires and billionaires, many of which will want new office buildings and homes. The problem is that this is nutty California, a state determined to ban the single family home:

It's no secret that California's regulatory and tax climate is driving business investment to other states. California's high cost of living also is driving people away. Since 2000 more than 1.6 million people have fled, and my own research as well as that of others points to high housing prices as the principal factor.

The exodus is likely to accelerate. California has declared war on the most popular housing choice, the single family, detached home—all in the name of saving the planet.

Metropolitan area governments are adopting plans that would require most new housing to be built at 20 or more to the acre, which is at least five times the traditional quarter acre per house. State and regional planners also seek to radically restructure urban areas, forcing much of the new hyperdensity development into narrowly confined corridors.¹

And for the middle class homes:

'California is God's best moment," says Joel Kotkin. "It's the best place in the world to live." Or at least it used to be.

Now, however, the Golden State's fastest-growing entity is government and its biggest product is red tape. The first thing that comes to many American minds when you mention California isn't Hollywood or tanned girls on a beach, but Greece. Many progressives in California take that as a compliment since Greeks are ostensibly happier. But as Mr. Kotkin notes, Californians are increasingly pursuing happiness elsewhere.

Nearly four million more people have left the Golden State in the last two decades than have come from other states. This is a sharp reversal from the 1980s, when 100,000 more Americans were settling in California each year than were leaving. According to Mr. Kotkin, most of those leaving are between the ages of 5 and 14 or 34 to 45. In other words, young families.

The scruffy-looking urban studies professor at Chapman University in Orange, Calif., has been studying and writing on demographic and geographic trends for 30 years. Part of California's dysfunction, he says, stems from state and local government restrictions on development. These policies have artificially limited housing supply and put a premium on real estate in coastal regions.

"Basically, if you don't own a piece of Facebook or Google and you haven't robbed a bank and don't have rich parents, then your chances of being able to buy a house or raise a family in the Bay Area or in most of coastal California is pretty weak," says Mr. Kotkin.

While many middle-class families have moved inland, those regions don't have the same allure or amenities as the coast. People might as well move to Nevada or Texas, where housing and everything else is cheaper and there's no income tax.²

The secret to being a successful builder here is not what it used to be, or still is in other areas, the secret here is navigating the bureaucracy and actually getting the right to build, and build something your customer actually wants, not what the government thinks he should want. On my current project I allowed $100,000 for permit and other government fees, and another $100,000 for Chapter 17 Special Inspection fees, I'm still within budget but have my fingers crossed. After a two year fight I got permitted as a remodel instead of new home, it's a lot easier to permit a remodel, something they encourage, than a new home something they discourage. I still had to pay a $450 fee to the County Roads and Airports Commission and make a presentation proving that my project wouldn't be adding to the burden on the roads and airports of the community, I did successfully get a negative declaration on an environmental impact report.

Obviously we need all the millionaires and billionaires that we can get, Facebook and it's spinoffs should do just that, until the next Internet bubble collapses, and with the crazy prices like you just cited for Instagram there are those predicting another bubble burst.


¹ http://online.wsj.com/article/SB1000...Tabs%3Darticle
² http://online.wsj.com/article/SB1000...Tabs%3Darticle

[SpecBid]

Joe, you're right. W 30 mil users there has to be some data for resale. few things I heard were; 1. the data right now is hard to package. its a lot of younger people, not really identifying any strong preferences. It's very ambiguous at best. Again, I have no insight other than what I've heard. 2. apparently facebook has invested $ into facial recognition software, and this apparently ties into that. again, just something that someone close to the situation told me.
Its the critical mass approach that a lot of start ups are starting to adopt...no revenue model but users. and lots of them. I'm a fan of "Freemium", but Instagram had no additional features or upgrades to charge for. Just at the right place at the right time.

[jstoddard]

Well -as of right now (until FaceBook's IPO later in the month) both companies are still privately held so it would have to mean some transfer of actual ownership/assets. Who knows - maybe $20M cash and $980,000,000 worth of Farmville credits or 980,010,000 $.99 virtual birthday presents (discontinued)?

If the deal actually gets done after the IPO, then it would mean something like a 1% (assuming FB is still worth $100B at the time of the IPO) transfer of common stock - but that could get messy because Facebook's board of directors would have to approve and it would be subject to all the other FTC regs.

JLS

[jstoddard]

Dan
It has to be right place right time/ There's a ton of competing apps that let you filter photos some way (same as Instagram) and then share via Facebook, etc.

They do have that unique "square" look - like an Instamatic camera or Polaroid. Other filters do that too - but IG has managed to make it their thing.

One thing they do make more convenient is adding photos to multiple services at a time (?). None of that is worth $1B.

[J.Buesking]

i totally agree Joe. I've never used the app. I've also never used pinterest. I still never understood the value in something like that being so high.

[Otis P. Driftwood]

From what I've read, FaceBook sees Google as their #1 competitor, thus the "need" to buy instagram. Fact is, Zuckerberg runs Facebook, period.