3 Simple Reasons Instagram Is Worth $1 Billion to Facebook
After news yesterday that Facebook is set to spend a staggering $1 billion to acquire photo-sharing app Instagram, several tech pundits were left scratching their heads about why Instagram was worth so much to the tech giant.
Most noted that Facebook doesn't need to gain either users or revenue (Instagram is still pre-revenue). Others surmised that CEO Mark Zuckerberg just wanted to squash a potential competitor, or that maybe he wanted to gain access to Instagram's 30 million mobile users' personal data.
But some have their money on something else.
"User experience is a high point of vulnerability for Facebook," says Robert Fabricant, vice president of creative for the design firm Frog, which is based in New York City. "Yes, it built such a fundamental infrastructure for sharing, but most of its attempts to create a good user experience have been, frankly, feeble."
Need more convincing? Here are a few reasons Instagram will give Facebook a much-needed facelift-- and why it might actually be worth the hefty price tag.
1. Facebook's mobile experience is clunky.
About half of Facebook's 845 million users access their accounts through the Facebook mobile app (that's roughly 450 million, and that number is only growing). Since the company hasn't figured out how to generate revenue from its app, Facebook has publicly labeled "mobile" as a risk to its bottom line.
"In the case of mobile, Facebook just didn't do it right," says Gene Liebel, chief strategy officer at Brooklyn-based digital design agency Huge. "Candidly, their attempts to date are a little humiliating. Instagram is a way for them to start fixing this issue." (He adds, "On the other hand, I can't get my elderly father-in-law off Instagram.")
And Facebook certainly couldn't ignore the data: 20 percent of Instagram users connect to Facebook. That's up from 15 percent last year.
"Especially in technology, you have to be concerned with the entire experience, A to Z," says Alfredo Muccino, veteran Silicon Valley designer and the chief creative officer at Liquid Agency. "For Instagram, that entire experience is very good, easy and just fun. It's not clunky. I don't see that in Facebook mobile right now."
2. The competition is catching up...fast.
"I think Facebook is getting a little nervous about Pinterest, for instance," says Fabricant. "There is a new generation of meaningful social networks that are all about personal identity curation. Like Pinterest, Instagram understands that the future is photo-driven, and that those photos are about style and moments."
Pinterest has been gaining significant traction lately. Boasting more than 10 million users, it recently became the third-largest social network behind Facebook and Twitter. In addition to Pinterest, Path—a mobile app which allows users to share photos and messages with a select, small group of people—has also surfaced as a mobile competitor to Facebook. The company, which boasts 2 million users, was founded last year by former Facebook employee Dave Morin, and has been praised for its elegant user experience.
"Facebook is playing catch-up," Fabricant adds. "It can either become this fundamental layer, the glue that holds this world together, or they can start creating better environments for users across the the board."
3. Facebook needs more "cool."
"Instagram is doing what Kodak did decades ago: Making photos less about recording, and more about capturing moments of real life," says Muccino. "Facebook was about record keeping. By buying Instagram, it ensures that they will have this element of style and heart that comes from Instagram."
In fact, Instagram is so cool some of its users have started a backlash—threatening to delete accounts as protest against Facebook. Both CEOs stated in their announcements that nothing would change for Instagram users. At least, not right away.
"There are so many possibilities for how Facebook could use Instagram," says Fabricant "It's not hard to imagine how good it could be. Then again, you never know."