One billion dollars. That’s how much Mark Zuckerberg’s Facebook spent on buying the relatively simple photography application Instagram today. To put that in perspective, that’s more than a fifth of what Australia spends on foreign aid every year (which is pretty terrifying no matter which way you look at it). So what is Facebook buying into?
Instagram has over 30 million users on iOS, and since its launch on the Google Play Store (Formerly Android Market) last week, probably in excess of 5 million users on Android devices now. With a potential user base of 35+ million people with access to this app, it’s not surprising that Facebook has bought into such a successful mobile device application. If Instagram had sold its app at the common price of 99 US cents (and even more in countries external to the US), it would have generated well over $US40 million in revenue. Not bad for a company made up of a total of nine staff.
Of course, this isn’t necessarily a popular move. We’ve seen how companies such as Facebook/mobile device publisher Zynga have faced user backlashes after acquiring popular games and then monetising them with premium subscription options and advertising. The fear that Facebook will do the same seems to be widespread, with users actively tweeting about their removal of their accounts. Platforms that use the Instagram API are being overloaded with user requests to save their Instagram photos for offline use as people jump ship from the popular app.
So why is this a smart purchase from Facebook, if users already feel alienated from the application’s developers purely from the sale?
The most surprising news to come out of Facebook’s announcement is that while they were bringing the staff of Instagram to Facebook HQ, they weren’t making them a part of the Facebook staff. Instead, in a rather unexpected move, Facebook announced that the team would be kept at arm’s length as an independent entity. Just how independent that will be remains to be seen, as one might suspect they will instead be steadily absorbed into the Facebook family, but to make such an announcement openly so early in the piece is a promising sign from the Western world’s premier social network. To suggest that Facebook would continue to grow the app amongst all social communities and not just its own is almost laughable, but Zuckerberg had this to say about Facebook’s approach to the continuing development of Instagram: “[Facebook will be] mindful about keeping and building on Instagram’s strengths and features rather than just trying to integrate everything into Facebook…Millions of people around the world love the Instagram app and the brand associated with it, and our goal is to help spread this app and brand to even more people.”
If Zuckerberg holds to this promise, then it can only mean good things for Facebook, with this approach likely to integrate the lives of Instagram Facebook users even further, leading to stronger likelihood of user retention for both the app and the social network.
So where to from here for the photo sharing app? Well, as long as Facebook can keep its grubby mitts off user location data and stop advertisers doing the same to target ads at users, one could quite easily assume that the app will continue to grow despite the current drop in its user base. However, with the app developers now headquartered at Facebook headquarters in Palo Alto, it’s entirely possible that things will change for the worse at Instagram and user fears will be proven correct. As an avid Instagram user myself, I will be praying this doesn’t happen as I retain my account.