it's not the crime, it's the coverage

[rone]

So Om Malik wrote this thing about what impelled Facebook to buy Instagram.  First off, i can't get past Malik's assertion of "Facebook's achilles heel"[sic] being "mobile photo sharing".  Seriously?  Mobile photo sharing is a hard-driving revenue stream for anyone in this world?  Is there any evidence that this was considered a weakness by anyone at Facebook?  I can lean on my experience and tell you that sharing photos from my Android phone is stone easy to Facebook, because my phone came with the Facebook app installed.  I couldn't've done it on Instagram at all until very recently.  Facebook was worried about Instagram's mobile photo sharing mojo?  I call bullshit.

And calling Instagram "a platform built on emotion"... what the hell is that about?  I wonder if he's an advance Facebook stock share owner, because it sure as hell sounds like he's trying to talk himself into the deal, which is no less than ludicrous.  Who drops $1B, even if most of it is fake money, on an emotion-based platform?  Emotion fades.

Some are comparing it to Google buying YouTube, but others are comparing it to eBay buying Skype.  I think that it's far more likely to be closer to the latter, except worse.  Bottom line: even if, somehow, this turns out to be a good deal for Facebook, it won't be because of them addressing their supposed "Achilles heel", or because of the strength of Instagram's "emotion".

Bonus cluebie: some "business leader" thinks that Twitter "F$($#@ UP in somehow letting Instagram ended up inside of Facebook"[sic], because nothing says "mobile business advisor" than someone playing with ginned-up valuation numbers.

Comments

[haineux.livejournal.com]

Facebook bought themselves a lot of fixie-driving, artisanal cupcake-eating, ironic facial hair-toting hipsters (personal data, if not actual members).

And some fixie-driving, artisanal cupcake-eating, ironic facial hair-toting hipster developers.

(I know, I should quit the derision.)

[boutell.livejournal.com]

Facebook should buy figgif for $1B! I sell a copy of that, most days!

[boutell.livejournal.com]

Maybe I should make it free and get bought by Facebook for $1B.

[en-ki.livejournal.com]

Shit, I was supposed to be using Instagram this whole time?

[foomf.livejournal.com]

My goodness gosh, but that set of replies looks as sycophantic as anything I've ever seen.

I wouldn't have noticed the problems you point out but then I don't really think about Facebook and "business model" in the same mental framework - Facebook is, in essence and in my never-humble opinion, an accidental success and a danger to itself and others.

[ronebofh.livejournal.com]

I don't think that its success is anymore accidental than any other success, but its continued presence is more a matter of inertia than of any loyalty earned by a compelling experience.

[kodi]

sure, you could post to facebook without Instagram on your Android phone... but were your photos yellow enough? I think not!

[mmcirvin.livejournal.com]

I am profoundly embarrassed that my online sharing is lacking in fake film grain and vignetting.

[ltempt.livejournal.com]

"Sun buying MySQL"

[freelikebeer.livejournal.com]

A BILLION dollars. I'm going to be sick.

[tskirvin.livejournal.com]

If I were a board gamer, I would believe that Facebook is trying to inflate the current Internet bubble as much as possible in time for its IPO, in order to inflate its share value; and that it is doing so by transferring money out of its coffers and into a new company and, perhaps, into some people's pockets.

Were I an 18xx board gamer, I would sense a company dump in the offing.

[rwx.livejournal.com]

it is an entirely rational business decision for facebook to throw a billion dollars at anything that looks like it might eventually morph into something that could unseat it. the rest of it is bullshit, although what instagram was doing with its api could have grown into something that could annoy facebook.

[ronebofh.livejournal.com]

I could much more easily see Facebook throwing $1B at Klout's snake oil than at a friggin' photo sharing outfit. What was Instagram doing with its API? I noted stories of its valuation jumping from $100M a few months ago to $300M and then $500M. It boggles the mind.

[thorfinn]

Anything that pulls people out of Facebook.com is competition to Facebook.

I venture to suggest that one of the top three killer features on Facebook for its consumers (i.e., its product) is quick and easy photo sharing, because Facebook is all about social gossip, and gossip is waaaay better with photos.

Instagram is about the only popular thing floating about that does photos as social gossip, so it makes plenty of sense for FB to buy them as a defensive move.

It's still a ridiculous price, but it's perfectly sensible strategy.

FB have absolutely no reason to care about Klout - it's numerical noise for nerds, and therefore irrelevant as far as actually retaining their product is concerned.

(The other two killer FB features are event management and textual gossip i.e. status updates.)

[ronebofh.livejournal.com]

It's only "sensible strategy" if you accept that "Anything that pulls people out of Facebook.com is competition to Facebook," to which i say, "bullfuckingshit." If Facebook believes it, then double that.

It's silly to dismiss Klout as "numerical noise for nerds" and pump up Instagram as "the only popular thing floating about that does photos as social gossip." That's just your bias talking.

If FB's event management and "textual gossip" are "killer features" in anyone's eyes, we are fucking doomed as a society.

[thorfinn]

Facebook's customers are advertisers and Zynga. Their entire rather large revenue stream comes from that. So anything that takes people out of Facebook.com reduces the amount of advertising they can send.

It doesn't seem like particularly difficult logic to follow from there that anything that pulls people off Facebook.com where they serve ads is a problem for Facebook.

As for bias - hey, I'm a nerd. I like nerdy things as much as the next nerd. But nerds aren't even close to a a significant proportion of normal human society, like it or not. We have an awful lot of impact - I'd go so far as to say we actually do a lot of running the modern world, but there really aren't a lot of us.

Normal human society freakin' loves gossip (whether pictorial or textual or just plain old direct in person chats). And most of them don't think in numbers, either.

This isn't something magical relating to humans today, either. you'll find exactly the same complaints going back through human history pretty much everywhere.

[ronebofh.livejournal.com]

It's precisely the fact that you're a nerd that biases you against Klout by calling it "numerical noise". If that were the case, it wouldn't be where it is now. Some VC assclown somewhere thinks that the noise is good enough to merit funding.

There are plenty of things that pull eyes off Facebook, and yet Facebook isn't in a rush to buy them. So that's why i think there's more to their dysfunctional decision than your reasons.

[thorfinn]

I expect the people at Facebook have a pretty damn good idea of what their users are actually using the site for... and photos is massive on there.

What's your idea for the "real rationale" behind their decision? Got anything that doesn't violate occam's razor?

As far as I can see, it's a simple two step logic:

1. photo sharing is a massive heavily used feature for FB's users/product - arguably *the* feature that makes it better than anything else in terms of walled-garden draw. It's their equivalent of "search = google".

2. Instagram was pretty much the only mobile photo sharing site that even comes close to competing with that feature and thus pulling those users off FB. (There are other photo sharing sites, but I cannot think of a single one which managed to get 30 million users whilst not even bothering to do anything except an iPhone client.)

That's all there is to it. Any other explanation seems over complicated to me.

I still think it's a ridiculous price - but on the other hand it's completely undisclosed how much of that price is stock, and quite possibly newly minted stock. It could well be 99% stock, for all we know. FB is a private company right now, and just minting some stock at an arbitrary valuation is essentially a license to print fake money, particularly as they have their shiny upcoming IPO which will turn that stock into something resembling real cash.


As far as what VC assclowns will fund, they fund lots of things. It's gambling, pretty much. Lots of stuff VCs fund just falls over, and lots of stuff succeeds that VCs have gone nowhere near. The successes make them enough money that it's worth keeping on betting. So reading into individual cases of funding is, well, not very useful.

[ronebofh.livejournal.com]

Anyway, the rant isn't so much that Facebook bought Instagram for an outrageous amount because, really, who gives a shit. It's about yet another Internet journalist writer type person who has achieved notoriety despite being a useless and utter boob (Om Malik, Jason Calacanis, Robert Scoble... the list goes on for far too long).

[thorfinn]

Heh. Well, that some of these "pundits" / "journalists" are essentially trolls isn't in doubt. Even the "real" newspapers are pretty much reduced to trolling for hits to sell ads nowadays.

[kodi]

Yeah, that's my take - as far as Facebook is concerned, its main enemies are anyone who can put "social" and "10 million users" into the same mission statement. I'm not sure users are worth $20+ apiece, but it may be that keeping Instagram from hitting 100 million users is worth any price.

[eb-oesch.livejournal.com]

That's my normal reaction to mergers involving the top companies in any industry. "Synergy" is Business Speak for "monopoly/oligopoly capitalism", which for anyone close to the top of the hill is the biggest and most accessible profit driver around. Outperforming the competition is hard, but given a favorable legislative climate (that is, a modest investment in legislators), a moron could raise profits by buying out the competition and raising prices by 20%.

No actual monopoly is needed; an ordinary oligopoly consisting of friendly, sociable members willing to support a bit of informal price fixing will do just fine. Even a company with just 20% market share can appreciate that the downside of trying to reintroduce true competition into a market may be much larger than the upside if their profits would drop by 75% in the process. Of course, the company could dream of raising its margins to even higher levels later, but a company with just 20% market share cannot normally expect to beat its larger competitors in such a war, while the very biggest companies have to worry about anti-trust laws. Oligopolies aren't as bad as true monopolies, but they are still very different from true competition, and oligopolies are all over the place.

I really think that subverting competition (and responding to competitors' efforts to do the same) is a large part of the modern CEO's job. Do you suppose an oil company CEO is going to save their company a billion dollars by inventing and patenting a new piece to insert into their drilling rigs? They don't have the qualifications. Improving the morale of 10,000 employees is a ridiculously hard task as well, unless someone has made the task much easier by making them miserable to begin with. But what about cooperating with just a few dozen other executives at nominally competing businesses in order to fix prices? What about horizontal and vertical expansion in order to eliminate competition, and throwing corporate weight around to squeeze suppliers, vendors, and legislators? Those are things a CEO is actually qualified to do; those are ways a CEO can make a difference, not in the way the world works but in the corporate bottom line, which is what really matters.

(Side note: corporate profits only matter to the extent they can be converted into personal profits. Enriching oneself at corporate expense is glorious and admirable capitalism on a personal level. For an employee or executive to steal from their employer is only unethical only if it's illegal, and if they are caught.)

What about "better, faster, cheaper"? Better, faster, cheaper killed the calculator market back in the 1970s -- none of the companies that made calculation dirt cheap made any meaningful profits off of it. If you figure out how to make something 90% cheaper, then sooner or later, that knowledge will get out, prices will go down, and in the worst case, the revenues of the entire market will shrink 90%, which is bad business if you owned more than 10% of the market to begin with.

[nothings.livejournal.com]

Downside: it gives some not-for-long-employees a billion dollars to play with in their NEXT startup, which might make that one even more likely to unseat facebook.

[rwx.livejournal.com]

upside: they're all probably working at facebook for three years and bound by legal contracts written thrice in blood.

[ronebofh.livejournal.com]

Bound by money, perhaps.

[thorfinn]

The figure quoted is 1 billion dollars, but the proportion of stock vs cash is completely undisclosed anywhere. So it's a big case of who knows, but I'd bet on some big long term stock options in the new employment contracts, especially as there's an big shiny IPO coming up.