itsallwater wrote:
I don't really get what Facebook get out of the deal? I would have assumed the're big enough to build and push a far better version of such software. They already have the market share of internet users data and images (citation needed), so why pay so much for the marginal users?
My take would be: Facebook aren't particularly well set up for mobile social networking. Sure, it has native apps, but they're a bit clunky (they're mostly just web views) and it's hard to find anyone who's in love with them. Meanwhile, there are other social networks that were either accidentally perfect to use used in two minute bursts on a mobile device (Twitter) or specifically designed for that (Instagram). The general consensus seems to be that we're heading towards a world where smartphone/"post PC device" usage dwarfs PC usage (both through growth in the third world, where computers have never had a foothold, and through consumers in the first world preferring to use simpler, more reliable appliances). As we move towards that world, Facebook becomes threatened by the social networks that work better on those devices. Acquiring the competition is a sensible move, therefore, as it not only makes Facebook more credible in the new market, but also directly removes the threat.
Did Facebook overpay, though? Consider that $1bn sounds like a lot, but is actually just 1% of the expected market cap Facebook will attain when it IPOs in a few weeks. On the other hand, just last week, Instagram closed a $50m funding round with some VCs that valued the company at $500m; Facebook paid twice that days later. There is some evidence, then, that Facebook panicked (it seems likely that if Instagram was up for sale, other companies would have been sniffing around also), but also that it hasn't paid more than it can afford.