Facebook bought Instagram: how Twitter messed up (Google too)

So you’ve heard by now that that Facebook bought social photo sharing app Instagram for around $1 billion. That’s not a typo, not a late April Fools’ day joke, they really paid that much money for the company. A company that has seen its valuation double in just 10 days (from the estimated $500 million valuation a few days ago to what Facebook paid for them today). A company that had their app downloaded over 1 million times in the first 24 hours after their Android launch. A company that was left for dead by its original investors a few months after launch. A company that, in less than 2 years, has scared every single social platform from Facebook to Twitter to Google on its way to ammasing a dedicated and passionate 27+ million users.

I’ve been very critical of Instagram as a business in the past, but I am also an avid user of the service, so I’m mixed when I think of the money Facebook spent to (eventually) wall them off from the other guys. However, Systrom and company would have to be crazy (ala Groupon crazy) to turn down this kind of money, so good on them for coming to their senses and taking this deal. While I believe that his deal is more a defensive maneuver than anything else, it is also and a deal that could signify the beginning of the end of Twitter’s hopes at becoming the world’s social stream.

In simple terms, Twitter (and to a lesser degree, Google) messed up. By messed up I mean F$($#@ UP in somehow letting Instagram ended up inside of Facebook. The price Facebook paid for Instagram will net out to be about 1% of the company’s valuation – a price worth paying to keep their competition out (perhaps Instagram didn’t negotiate well enough!).

Twitter had to have been looking at Instagram – you can’t ignore the incredible activity and value that the service was bringing to Twitter. It was a natural fit to the way Twitter works – photo sharing and discovery is something that requires very little explaining to Twitter users, as the impact of Instagram for Android on Twitter clearly shows. Twitter, for the most part, is about broadcasting our immediate emotional state in text and Instagram does the same in photo. As we discussed on Where’s The Money?, Instagram’s talk about moving from a photo sharing service to a platform was also a significant threat to Twitter’s status, as photo sharing is a more natural environment for conversation. Pictures make it easy for everyone to contribute – we’ve been doing that since the first social networks on cave walls. Even if Facebook leaves Instagram alone, the vision of a photo-heavy conversation and discovery platform within Twitter will now likely never come together, to Twitter’s detriment.

A note on Facebook leaving Instagram alone. I’m always skeptical of a company that says it will leave an acquisition to continue on as a seperate company – at some point that won’t work (especially when the company is Facebook and about to go public) and it will need to be integrated. Sorry Instagram users, it’s going to happen, no matter what Zuck says.

The big picture here is the fact that Instagram is a mobile company – they don’t even have a web presence yet. Instagram is also mobile company that, up until last week, was only on a single platform, and yet was still somehow the third largest social network on the planet. This is a mobile company that, just as Netscape did to herald in the Internet era, brought us into the mobile era with a blind-side nuclear explosion. Now they’re paired with an established, desktop based social networking behemoth. It will be spectacular to watch.

Whatever happens next, one thing is clear: Instagram was a great opportunity for the established social networks to leapfrog the competition – one that Twitter should have taken advantage of (they should now be looking at Pinterest with, well, interest).

And what about Google? Well, they got Oink

About the author

Rob Woodbridge

I'm Rob, the founder of UNTETHER.tv and I've spent 14 years immersed in the mobile and pervasive computing world. During this great time I've helped some of the most innovative companies grow their business through mobile. If you are in need of a mobile business advisor or coach, connect with me here to get things rolling.

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