Facebook buys Instagram. Soon to become yet another advertising platform?
The Internet is a flurry today with news of Facebook having bought out the photo editing and sharing app Instagram to the sum of $US1 Billion in cash and stocks.
Facebook have advised that the App will stay independent of the rest of Facebook, but for how long? 1 Billion dollars is no small amount of money, especially for a platform which not only makes no profit, but doesn’t even have the current capacity to do so.
The last few years have seen a number of extremely high valuations for sites that produce no profit, of which Twitter and Tumblr counted amongst. Can you imagine the run costs of these organisations? Not only do they make no profit, but they must burn through cash like the American Government, and as such need to find ways to stay afloat. All the while they are kept afloat by investors buying into the business (but only until they can make their big return when the advertisements start rolling in). Just look at Twitter who started their ‘Sponsored Posts’ program, or Tumblr and their own ‘Highlighted Posts’ platform.
Don’t get me wrong, this isn’t anti-Facebook by any means, Instagram always needed to find a means of profit, so now being part of their big brother, they could even continue to bleed, and still be counted as an asset amongst Facebook’s growing banner men.
From a more inspirational standpoint, the founders Kevin Systrom and Mike Krieger have netted $US500 Million dollars from this venture, which is amazing, considering the application is only 2 years old.