$1 billion for a startup called, Instagram ? What the hel* we said.
In 2012 when Mark Zuckerberg decided to spit out $1 billion for Instagram($1 billion was the market price, closed at $715 million because of a decline in the value of Facebook’s stock.), it shocked the whole world and questions was asked. Some even wondered if Mark just wanted to buy out Instagram because he feared a potentially tough competition for Facebook- which would have been a reasonable call at that period due to the rapid rise in prominence on Instagram.
Mark Zuckerberg must have felt the sharp influence the popular photo-sharing app had on selfies and pictures, which was Facebook cornerstone initially. At that period Facebook was no longer the most popular place to upload your birthday or anniversary pictures.
In order to provide a very comfortable platform for Facebook to operate efficiently, Mark knew instantly that Instagram acquisition would be the best solution- bring the photo-sharing app & integrate with the Facebook team, instead of trying to compete with Instagram.
During the acquisition of Facebook, it was reported that Mark Zuckerberg decided not to involve the board of directors at Facebook during the process until the last day. He knew exactly what needs to be done, and couldn’t risk it all on multiples of boring board meetings, financial advice or corporate bureaucracy.
But now Instagram has grown exponentially and has successfully been integrated into the Facebook business. Thanks to loads of new features (even though some were copied from Snapchat) Instagram continue to flourish and beat initially expectations.
The last two years has been very golden for the photo-sharing app, as numbers of active users on the platform now sits comfortably at 600 million users (times two of what it had two years ago), which is nearly twice Twitter that has been stuck at around 300 million users since the beginning 2015. The photo sharing app also added 100 million users in the last 6 months, marking its fastest growth rate ever.
It should be well noted that during the time of Instagram acquisition by Facebook, Instagram had just 30 million users. Facebook’s acquisition of Instagram and also Whatsapp($22 billion) has well proven that the social media guru has recognized the trends of the world moving mobile, and saw a long-term potential for the both platforms as users continue to use the Internet via mobile rather than desktop.
Buying Instagram, Facebook sent a message across to all its competitors and investors that it was very serious about becoming the dominant force on the mobile ecosystem. In 2012, Facebook wasn’t making much from the mobile ecosystem and feared been pushed aside by popular mobile-first platforms like Twitter and Instagram itself.
During the first quarter of 2016( Jan-Mar), it was estimated that Instagram generated more than $500million(half of it $1billion acquisition) on ads on the platform, which is almost 10% of what Facebook projected to be it revenue for the first quarter of 2016. It was estimated by Credit Suisse that by the end of 2016 the figure will hit more than $3 million(Twitter generated only $2.2 billion in 2015 as a year).
That’s totally fantastic from a $1 billion acquisition that is still in the relatively early stages of monetizing. Some people today believe that Instagram should be valued between $30billion – $40billion, who could argue? Did you know? The photo-sharing app valuation was initially at $100million three months before Facebook’s acquisition.
Even though it was acquired for a mouth-gapping $1billon, you gotta give credit to Mark Zuckerberg for acting swiftly in acquiring the photo-sharing app even though it seems to be an exorbitant fee for a successful startup. Facebook call to move and become a dominant force in the mobile eco-system can only be applauded as now 80% of Facebook’s revenue is generated on mobile.
Mark Zuckerberg is not only a genius Founder but also an intelligent CEO that has helped Facebook soar high when it’s competitors like Twitter & Pinterest are struggling for air.
Also published on Medium.