Facebook Was Smart to Buy Instagram for $1 Billion

As a Silicon Valley-based company, we’re always interested in what our neighboring companies are doing. Of course we have some fun and interesting neighbors from Yahoo and Google to Apple and Facebook. Recently, there’s been a lot of talk in these parts about Facebook’s recent acquisition of Instagram, the popular photo sharing app for iPhones (for a whoppin’ $1 BILLION!). Not only are both companies neighbors of ours, but YesVideo, arguably, is in a similar business to both Instagram and Facebook as we also enable sharing of video and photo content. We thought we’d share our thoughts on this latest development:

Instagram has 40 million users.
Facebook doesn’t need a single one of them.

Instagram has $0 revenue.
Facebook needs all the revenue it can get prior to its public offering.

Instragram has 13 employees.
Facebook needs hundreds of engineers.

Why the acquisition?

Clearly not for their users, revenue or army of employees. This was an acquisition about product features and serving the needs of existing FB members. Did you know that more than half Facebook’s active members (and we count ourselves among them) access FB via a mobile device? And, what do you think they do most: post pictures.



In walk’s Instagram, the mobile only service that allows you to easily share photos (and do a few other nifty things like post them to FB). Was Instagram really worth a billion dollars? Who knows, but Facebook is catering to the mobile-toting audience that is about to make them worth more than 100 billion dollars when they launch their initial public offering in May. They say a picture tells a thousand words, but sometimes it also equals a billion dollars.  Can video be far behind?