It has now been 12 months since Facebook agreed to purchase photo-sharing social network Instagram for $1 billion (£656 million), more than double its estimated value at the time.
Although the final price - consisting of a mixture of cash and stocks - actually totalled $715 million because of a drop in Facebook shares before the deal was authorised, it still represents a significant investment in a company that analysts remain unsure will ever bring in huge profits.
The first year
At the time of the deal, Instagram had around 30 million users. Over the last 12 months, this has swelled to 100 million active users per month, posting a combined total of more than 40 million photos each day, according to figures published by Time Magazine.
The company has also doubled the amount of staff it employs, with a new business operations director making the move over from Facebook.
However, despite the fact Instagram chief executive Kevin Systrom has publicly stated the eventual goal is to ensure the site becomes a sustainable business, it currently earns no money at all. So why was Facebook so keen to make the purchase?
Strategic moves
Prior to the buyout, Instagram was already a seriously popular social network in its own right. The ability to apply filters to standard photos, instantly turning them into works of art appealed greatly to users and the expectation was that the site was set to go from strength to strength in its own right.
Eventually, the likelihood is it would have developed into a direct rival to Facebook. One of the most popular aspects of the site set up by Mark Zuckerberg in 2004 is photo sharing and Instagram users have taken to posting pictures to represent their mood, rather than directly describing it to those they are connected with.
In terms of usage, Instagram is perhaps closer to Twitter than Facebook, as users "follow" each other, rather than request to be friends and, unless you chose to set your profile to private, all other users will be able to see your photos. Perhaps this is why Twitter was also keen to buy the company.
World Wide Web war
According to the New York Times, Twitter bid around $525 billion for Instagram. Clearly, the company chose to accept Facebook's offer, which at the time was worth almost double. Although it seems a considerable sum for an entity that doesn't return profits, Facebook clearly feared the might of a combined Twitter and Instagram social network.
Indeed, since the takeover, the battle between Facebook and Twitter has intensified significantly and in December 2012, Instagram withdrew support for Twitter cards. This means that users who share their photos on the micro-blogging site now do not have them embedded and all that appears is a link to Instagram.
Mr Systrom said this move was taken because "we believe the best experience is for us to link back to where the content lives".
Although this can be construed as a transparent attempt by Instagram - and essentially Facebook - to pull users away from Twitter, it is not unusual for social media sites to act in this way.
Twitter and Facebook both regularly change their policies to limit the strength of third-party apps and while Instagram may currently find itself being used as a pawn in the battle between two social media giants, this could change significantly if it begins to bring in profits for its parent company.
About The Author: Jamie Stevenson is a specialist copywriter who writes for a variety of websites, including a number of family solicitors in London.
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UPDATE: I've just received news that Derek's Home and Business Blog is in the spotlight on Cision UK. As a leading public relations company, Cision UK provides PR and media solutions including software, services and tools to members of the media and communications professionals. Thank you Cision UK! I'm so honoured to have my blog listed in this week's blog spotlights. You can view my blog’s listing at: http://www.cision.com/uk/media-updates/uk-16-may-2013/
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© 2013. This article is DMCA protected. Republication is prohibited.
Although the final price - consisting of a mixture of cash and stocks - actually totalled $715 million because of a drop in Facebook shares before the deal was authorised, it still represents a significant investment in a company that analysts remain unsure will ever bring in huge profits.
The first year
At the time of the deal, Instagram had around 30 million users. Over the last 12 months, this has swelled to 100 million active users per month, posting a combined total of more than 40 million photos each day, according to figures published by Time Magazine.
The company has also doubled the amount of staff it employs, with a new business operations director making the move over from Facebook.
However, despite the fact Instagram chief executive Kevin Systrom has publicly stated the eventual goal is to ensure the site becomes a sustainable business, it currently earns no money at all. So why was Facebook so keen to make the purchase?
Strategic moves
Prior to the buyout, Instagram was already a seriously popular social network in its own right. The ability to apply filters to standard photos, instantly turning them into works of art appealed greatly to users and the expectation was that the site was set to go from strength to strength in its own right.
Eventually, the likelihood is it would have developed into a direct rival to Facebook. One of the most popular aspects of the site set up by Mark Zuckerberg in 2004 is photo sharing and Instagram users have taken to posting pictures to represent their mood, rather than directly describing it to those they are connected with.
In terms of usage, Instagram is perhaps closer to Twitter than Facebook, as users "follow" each other, rather than request to be friends and, unless you chose to set your profile to private, all other users will be able to see your photos. Perhaps this is why Twitter was also keen to buy the company.
World Wide Web war
According to the New York Times, Twitter bid around $525 billion for Instagram. Clearly, the company chose to accept Facebook's offer, which at the time was worth almost double. Although it seems a considerable sum for an entity that doesn't return profits, Facebook clearly feared the might of a combined Twitter and Instagram social network.
Indeed, since the takeover, the battle between Facebook and Twitter has intensified significantly and in December 2012, Instagram withdrew support for Twitter cards. This means that users who share their photos on the micro-blogging site now do not have them embedded and all that appears is a link to Instagram.
Mr Systrom said this move was taken because "we believe the best experience is for us to link back to where the content lives".
Although this can be construed as a transparent attempt by Instagram - and essentially Facebook - to pull users away from Twitter, it is not unusual for social media sites to act in this way.
Twitter and Facebook both regularly change their policies to limit the strength of third-party apps and while Instagram may currently find itself being used as a pawn in the battle between two social media giants, this could change significantly if it begins to bring in profits for its parent company.
About The Author: Jamie Stevenson is a specialist copywriter who writes for a variety of websites, including a number of family solicitors in London.
Did you like this article? Please let Jamie and myself know by leaving us your valued comments.
Would you like to guest post on the blog? Please use the Contact tab above to get in touch if you write business-related articles or articles on the topics of Internet Marketing, Affiliate Marketing, Social Media Marketing/Optimisation (SMO), Blogging, Search Engine Optimisation (SEO) or Search Engine Marketing (SEM).
UPDATE: I've just received news that Derek's Home and Business Blog is in the spotlight on Cision UK. As a leading public relations company, Cision UK provides PR and media solutions including software, services and tools to members of the media and communications professionals. Thank you Cision UK! I'm so honoured to have my blog listed in this week's blog spotlights. You can view my blog’s listing at: http://www.cision.com/uk/media-updates/uk-16-may-2013/
If you found this or any of my other posts helpful, don't forget to share the posts to your favourite networks using the toolbar below or by using the "+1" and "Share" buttons located at the bottom of each post.
As ever, if you want to stay up to date with the latest blog posts, don't forget to follow via Google Friend Connect (button on sidebar), on NetworkedBlogs, via Email (maximum of one email per day), on Facebook and Google+ or by subscribing to our blog feed at:
http://feeds.feedburner.com/DereksHomeAndBusinessBlog
You can also follow me on Twitter @djones1509, Google+ and on Facebook at:
http://www.facebook.com/djones1509
https://plus.google.com/104849975941505117776
Until my next post on Tuesday on why your blogging reputation could be at stake, have a relaxing weekend!
© 2013. This article is DMCA protected. Republication is prohibited.
Instagram is increasing day by day. Social network is playing very vital role in Internet Marketing. Instagram is very popular after facebook and twitter.
ReplyDeleteHey Jamie,
ReplyDeleteInteresting analysis and, Derek, thanks for sharing it on your blog. Enjoyed connecting with this post via the BizSugar community and think it's a great way to understand how the big guys handle competition. I'm not certain this kind of rivalry is always productive with sites that, in many ways, provide a much different experience and share many of the same users. Something to think about for small online entrepreneurs too!
At the time of the deal, Instagram had followers and likes around 30 million users. Over the last 12 months, this has swelled to 100 million active users per month.
ReplyDeleteIt still represents a significant investment in a company that analysts remain unsure will ever bring in huge profits.
ReplyDeleteGood post ! Its nice to see..
ReplyDelete