In what's being described as the deal of the year, Facebook has acquired photo-sharing app Instagram for nearly $1 billion in cash and stock. In a word, wow. Instagram is now worth an astonishing $77 million per employee. Upon hearing the news, I had three very different reactions.
First, a purchase of this size and import would have been unfathomable even a year ago—and that has nothing to do with the value of the photo-sharing app. There's just no way that Zuckerberg et al. could have made that type of acquisition. It just didn't have the cash. But now that Facebook will soon be publicly traded with access to billions of dollars in capital, adding Instagram isn't so preposterous at all. One could make the argument that it's Monopoly money anyway.
Whether this purchase ultimately pans out is anyone's guess, but this much is certain: Facebook can now compete with the rest of the Gang of Four (Amazon, Apple, and Google) vis-à-vis acquisitions. And more moves are certain to come. This much has been evident for a long time, as I write in The Age of the Platform: How Amazon, Apple, Facebook, and Google Have Redefined Business.
Second, we are going to see more and more consolidation in the social media world. Last month, Twitter bought Tumblr's biggest rival (Posterous). This is completely expected as markets mature.
Not All Roses
Aside from making jubilant Instagram employees and investors rather wealthy, what does this mean for the rest of us? Clearly not everyone benefits from the Instagram acquisition. Hitching your wagon to individual applications and platforms for marketing purposes comes with risks.
Like all mammoth companies, Facebook is anything but universally loved. In fact, it routinely ranks high on "most hated company" lists. Many of its haters will now surely abandon Instagram–and some have already done so. Below is just one of many tweets echoing this sentiment:
What if you were heavily promoting your business on Instagram? It's certainly possible that a Facebook-friendly Instagram 2.0 won't exactly endear itself to your client base, many of whom may not be able to use Facebook or other social networks at work. As the tweet above indicates, not every Millennial is gung-ho on Facebook. And the outrage over Facebook's Timeline (from both design and privacy perspectives) hasn't entirely abated.
Of course, Instagram changes might not take place immediately. As its CEO Kevin Systrom said in a statement:
"We're psyched to be joining Facebook and are excited to build a better Instagram for everyone. The Instagram app will still be the same one you know and love. You'll still have all the same people you follow and that follow you. You'll still be able to share to other social networks. And you'll still have all the other features that make the app so fun and unique."
That may be the intent, but I somehow doubt that the terms of the deal tie Mark Zuckerberg's hands. What happens if Facebook wants to make tweaks to Instagram—behind-the-scenes or otherwise? For instance, what happens if the data show that users share photos more on Twitter or Google+ than on Facebook? What will happen to Facebook's supposed neutrality?
This is why I advise my clients to dabble with a slew of different services, platforms, and apps—even if you're not sure if these will take hold. For instance, I discussed last week the need to experiment with Pinterest, even though it won't displace Google or Apple anytime soon. I'm not saying that your company needs to hire a cadre of employees to ostensibly waste time on questionable applications and services. Clearly, there's "real work" to be done.
At the same time, though, understand that things happen online faster than ever before. Your hard work and client goodwill can be vaporized with one acquisition. The terms frenemies and coopetition exist for a reason.
My advice to small business owners: Hedge your bets and realize that very little is under your direct control. A major source of leads by one app or service one day may cease to exist tomorrow. Such is life in the Age of the Platform.