There's already a slew of coverage on the 1Bn price paid for Instagram by Facebook, and some views on what triggered Facebook to do this - mainly focusing on Facebook panicking at the growth of a potential challenger:
- Here's why Facebook bought Instagram [GigaOm]
- Did Facebook panic? [CNNMoney]
Price aside, does this purchase make sense? What is Facebook actually buying here?
They get 13 employees who know a thing or two about social & mobile photo app development and a ~50Mn mobile installed base. I think what really makes the case though, is the 1.5Mn photos posted daily by Instagram users. While this pales in comparison to the 250Mn posted on Facebook daily, these are the types of photos that delivers the user engagement that Facebook can monetize.
1. They're current - taken and uploaded on the go
2. Instagram photos are the ones that generate the most comments and interactions on FB, much more so that, say, full album uploads from the desktop
3. In most cases, you reveal location with these photos - more data for targeting ads
If Facebook is valued at $100Bn, then Instagram is fair value at 1bn as long at it increases users' time spent on FB by over 1%
