Facebook snaps up Instagram

Photo sharing startup Instagram has been acquired by social darling Facebook for an estimated $1bn, or a quarter of the network’s 2011 revenues.

James Middleton

April 10, 2012

2 Min Read
Facebook snaps up Instagram
Instagram has 30 million mobiel users

Photo sharing startup Instagram has been acquired by social darling Facebook for an estimated $1bn, or a quarter of the social network’s 2011 revenues.

The move should give Facebook more leverage in the mobile space. Instagram has more than 30 million users across its iOS and Android apps, showing off their photo portfolios. The app is already well integrated with Facebook and the likes of Twitter, and has a reputation for being easier than Facebook’s own app for uploading photos to the social site.

Mark Little, principal analyst at Ovum, believes the reason behind the high pricetag on Instagram is that “The Facebook proposition is becoming fat, allowing sub-propositions like photo-sharing to get lost or become difficult to access.”

Currently the usability of Facebook for mobile photo sharing does not match the experience offered by Instagram and many other apps that are well integrated with Android and iOS platforms. Facebook needs access to a better photo-sharing user interface to ensure it remains in control of an important type of shared content and the users that generate it.

“The price of $1bn is certainly inflated in terms of the usual revenue multiples (Instagram has no revenue) but this will have been driven by Facebook’s main rivals and so the price tag also has an anti-competitive element driven by the cash piles of Apple ($100bn), Microsoft ($52bn) and Google ($45bn). Rather than a bubble, these “inflated” prices are perhaps better described as a temporary market condition centred around a limited number of acquisition targets perceived as valuable and driven by the cash of four high-rolling Internet giants,” Little said.

In other billion dollar news, Microsoft has acquired a total of 800 patents from AOL and acquired a licence for the internet firm’s remaining patents for just over $1bn. It’s not been revealed what the patents cover exactly, but speculation says search, advertising and mapping are likely candidates, giving Microsoft more ammunition to go up against Google with.

It’s also not been gone unnoticed, in light of the Instagram purchase, that AOL has done exactly what struggling imaging firm Kodak is trying to do. Kodak, which went into Chapter 11 bankruptcy protection in January, has been trying to offload its 1,100 patents to gain some much needed cash, for some time now.

About the Author(s)

James Middleton

James Middleton is managing editor of telecoms.com | Follow him @telecomsjames

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