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Devices/smartphones

Oh Snap! Facebook to Buy Instagram for $1B

Facebook announced plans Monday to buy mobile photo-sharing site Instagram for a cool $1 billion in a move that will make the social networking giant an even bigger data hog for wireless carriers.

Facebook CEO Mark Zuckerberg announced the news on his profile page this afternoon: The company is offering $1 billion in a combination of cash and shares for the San Francisco-based startup. The transaction is expected to close later this quarter.

"We're committed to building and growing Instagram independently," Zuckerberg writes. "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." [Ed note: Phew, you can still share your blurry photos on Twitter Inc. ]

The stats behind the buy
  • The company was founded in October 2010 by Kevin Systrom and Mike Krieger.
  • Instagram has reportedly raised $47.5 million in funding since launch.
  • The company had 13 employees as of March 27.
  • 30 million Apple Inc. (Nasdaq: AAPL) iOS users have downloaded the app since it launched.
  • 1 million Android users downloaded the app as it was launched last week


A bigger hog?
Mobile photo sharing isn't the most porcine data hog out there; mobile video and streaming music tend to shunt bigger files over the air. But, with 30 million users and counting, the amount of traffic that Instagram can generate is nothing to be sniffed at.

The Verizon Wireless data calculator suggests that a digital photo can be up to 3MB a shot. Hence, uploading or downloading two photos a day can take a user to 180MB a month; 10 photos a day would take the user close to 1 gigabyte; and 20 to 40 photos a month might help a user bust through a 2GB cap even without videos, music or surfing.

These are rough estimates, since phones contain a wide variety of digital cameras with everything from 1-megapixel to 8-megapixel available. App developers and carriers also implement varying degrees of compression for photos in the data pipe.

Nonetheless, the trend is for bigger and better digital cameras in phones, even as Instagram gets the big bucks for making mobile shots look like they are old and faded.

Carriers: Happy snappers
The major U.S. carriers have tended to work with Facebook on photo-sharing promotions recently as a branding exercise. Verizon is promoting itself with 30 tablets in 30 days photo contest on Facebook. AT&T Inc. (NYSE: T), meanwhile, has its cover photo mosaic on Facebook.

The more mobile photos submitted, the more data used for the wireless carriers.

For more



— Dan Jones, Site Editor, Light Reading Mobile

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joset01 12/5/2012 | 5:36:56 PM
re: Oh Snap! Facebook to Buy Instagram for $1B

Yeah, Google had to be in there, too rich for Yahoo. Carriers missed this whole area yet again.


 


Oh well, Google can probably stump up a crumpled $10 for Vignette. :-)

sarahthomas1011 12/5/2012 | 5:36:56 PM
re: Oh Snap! Facebook to Buy Instagram for $1B

Seems like Instragram would be right up Google's alley. Wonder if they were in the running too...maybe that's why Instagram was able to get $1B out of Facebook.

kaps 12/5/2012 | 5:36:55 PM
re: Oh Snap! Facebook to Buy Instagram for $1B

This is really Facebook's YouTube moment -- with all the photos loaded to FB it just makes sense for them to snap up the generator of content instead of letting someone else get it. And with the IPO imminent there is plenty of cash to trade for "growth" that it will be able to show Wall Street.


I agree with Dan, another chance the operators missed. But they do that a lot, don't they? No clue on the apps side of the biz.

kaps 12/5/2012 | 5:36:55 PM
re: Oh Snap! Facebook to Buy Instagram for $1B

This is really Facebook's YouTube moment -- with all the photos loaded to FB it just makes sense for them to snap up the generator of content instead of letting someone else get it. And with the IPO imminent there is plenty of cash to trade for "growth" that it will be able to show Wall Street.


I agree with Dan, another chance the operators missed. But they do that a lot, don't they? No clue on the apps side of the biz.

joset01 12/5/2012 | 5:36:54 PM
re: Oh Snap! Facebook to Buy Instagram for $1B Because they still have to get users on the app and all evidence so far suggests that users look on carrier apps as useless/not as cool/bleh.
gtchavan 12/5/2012 | 5:36:54 PM
re: Oh Snap! Facebook to Buy Instagram for $1B Why not have a couple of software engineers write the app, the negotiate a net neutrality block with the carriers and have them herd all of their customers to your app. Even without violating net neutrality you could herd all of users to your app by making other apps slow and or denying them new features. Carriers clearly smarter than zukes, the will violate net neutrality and develop their own app and apple will carry those apps because in the world without net neutrality carriers are king.
optodoofus 12/5/2012 | 5:36:52 PM
re: Oh Snap! Facebook to Buy Instagram for $1B

Is no one seriously concerned about the valuation here on Instagram?  I am not a user so I cannot speak to the quality/value of the app, but $1B seems ridiculously rich for an application/company like this.  Does no one remember the last two or three times we show this show?  Does Lucent buying Chromatis for $4.5B not ring a bell?


The whole application/social networking/smartphone ecosystem is getting way too frothy and people are throwing stupid money around.  VCs are rushing in pell-mell to fund new application start-ups.  I think we all know how this is going to end (badly), though no one knows exactly when it will end.


I think some thoughtful analysis by LR on this trend might be very useful to your readers (especially those with short memories),


optodoofus

Stevery 12/5/2012 | 5:36:51 PM
re: Oh Snap! Facebook to Buy Instagram for $1B

> In this case, Facebook is paying for the massive user base.


Editorial note:  We used to use "eyeballs" around Y2K because "massive user base" consumed more bits.


They're exactly equivalent.  And I can't believe were back to this.

joset01 12/5/2012 | 5:36:51 PM
re: Oh Snap! Facebook to Buy Instagram for $1B

The valuation seems borderline crazy to me for a company that develops a free app. In this case, Facebook is paying for the massive user base. As previously suggested, seems like -- as details emerge -- there could be a bidding war behind this. But it certainly feels as bubbly as the wine that Instagram employees have now doubtlessly splashed out on/

DCITDave 12/5/2012 | 5:36:50 PM
re: Oh Snap! Facebook to Buy Instagram for $1B

The valuation suggests that Facebook will aim to make $33 to $35 off each Instagram user. So how does a company make about a dollar a month over three years off a large consumer base?


Storage?


Ad placement?


A flat yearly charge that includes services on Facebook?


I don't see that making money on 30+M users is as tough as the minor miracle of getting 30+M people to find, sign up, use an app and create content for you. I think that's what Facebook is thinking, since they've been in that spot before.

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