Buying Instagram Was The Best $1bn Facebook Ever Spent

As we all know Mark Zuckerberg’s Facebook spent the start of the month buying Instagram for $1bn dollars. Many have suggested this highlights the fact we are in a technology bubble, that $1bn was a crazy amount to pay for a company who provide a free app but I have spent the weekend telling anyone who will listen, included my very good friend @billie_broaris via Facebook, that I think the move was genius and here’s why.

To understand the move we must first understand what Facebook is, it is not a public space like the internet, it is a commercial platform. Don’t get me wrong I love Facebook but let’s not be naive it is a commercial platform owned by a company whose sole purpose is to try to make money from the relationships between people.

It is not a public space like the Internet as it very openly controls what you can and can’t do, Facebook can very easily seize or close your account. Facebook may appear to allow you unfettered social interaction but essentially it is pseudo public space analysing everything you and trying to capture your behaviour, your analytics to make money out of this. There is of course nothing wrong with that, we are all here to make money and Zukerberg never claimed to be running a charity.

The key thing about Facebook is that they are constantly trying to bring their social platform as close as possible to what we call reality (now I could argue all day about what reality really is and where we cross into hyper reality but that’s an argument for another space). Facebook want to encourage people to share their reality in as close to real time as possible, to check in and checkout of places and to upload pictures in real time.

This whole strategy makes perfect sense for their business as once you know where people are right now and where they are likely to go you can very easily begin to sell them what they need. So let’s look at the most pressing question was $1bn a lot of money for Facebook to pay for Instagram? Let’s analyse this.

Today it is very easy to upload pictures to Facebook and to tag them very quickly if you are using a desktop. If you are using a mobile phone it’s a very different story especially if you have a group of pictures to upload you may need to go through 6 or 7 screens and adding tags takes even longer.

The whole process of sharing pictures in real time from your mobile device takes too much time to do, Instagram solves that problem within one screen you can do everything, you take a picture press ok and it’s done and shared with whoever you wanted.

The genius of Facebook is that they identified that one of the key things people are doing on their platform today involves taking pictures and sharing them and they of course want to encourage people to share both pictures and locations. These two key activities are far simpler with Instagram having identified their own issues with doing this as the biggest threat to their business model, much more than twitter and Google+, Facebook bought Instagram whole.

This purchase takes one of the key services Facebook provides and improves that instantly while also allowing people to share or not share outside Facebook Zuckerberg said: “We plan on keeping features like the ability to post to other social networks, the ability to not share your Instagrams on Facebook if you want, and the ability to have followers and follow people separately from your friends on Facebook”.

To my mind to a company that makes money from relationships and the fact that you are on their platform the issues with sharing pictures effectively was the biggest threat to Facebook in the last year and a half and paying $1bn to get rid of that threat and to own that technology is money well spent, especially when you consider the Facebook strategy has always been a long term strategy.

This purchase really just shows that Mary Queen of the Nets assertion that more people will connect to the Internet by mobile device than by desktop by mid 2013 is actually happening right now ahead of schedule. Facebook realised that the mobile interface for uploading pictures could make or break their business and therefore the hole Instagram plugged for them was worth $1bn.

Facebook have showed their genius by realising now that very, very soon desktop will die into a niche market for social and business use, and if you haven’t got your mobile strategy sorted yet it is the time to start doing this now. Enterprises need wake up to this reality now and save themselves $1bn later.

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David Akka is Managing Director at Magic Software Enterprises UK. David is a successful executive manager with a proven track record as a general manager with a strong background in sales, marketing, business development and operations. Past experience in technology and service delivery include both UK and European responsibilities.