Instagram doesn't have any profits. It doesn't have any revenues. It doesn't have a marketing strategy to generate any money inside the near future, either, so there is no point discussing if it's "worth" US$1 billion. It can't possibly be, whilst it most certainly is.
Zuckerberg decided it was worth paying Instagram's founders US$1 billion in Facebook stock and cash, in case he was looking at the article that may relegate his career to a web historical curiosity.
Facebook doesn't make a US$1 billion-plus return on Instagram. It's enough that Instagram can't now go directly to build a rival social network around smartphones where Facebook is weak.
Only YouTube rivals Instagram for the rate at which it grew and the attention-dropping, jaw-popping price ticket at which it sold. Google knew its Google Video project was failing; it was as terrified as Zuckerberg that a rival was sprouting that will soon wreck its dominance of online advertising.
These hyper-defensive acquisitions are rare, particularly by companies still of their growth phase, like Facebook. But there are scores of small deals each month, where talent-hungry giants like Google buy a developer's not-that-hot start-up as portion of the method of hiring him.
- INDEPENDENT
By Stephen Foley
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