Why Facebook Bought Instagram?

With the recent purchase of Instagram by social media giant Facebook, speculation is at an all time high. The question on everyone’s mind is why Facebook would spend $1 billion to acquire the photo-sharing application Instagram. One of the more obvious answers to that question is the massive following Instagram has.

Instagram has a following of over 30 million users and, with the recent move to the Android market, the number is still rising. However, members are not something Facebook would ever need. With a fan-base of over 850 million users worldwide, the social media mogul may be looking at a way to monetize the increased user base.


With Instagram’s recent move to the Android market, the mobile segment Instagram is sure to gain is likely one of the largest reasons for Facebook’s acquisition. Although Facebook has a mobile application and many mobile users, most feel it is lacking compared to the desktop variant. Facebook’s main concern with mobile users may be they simply do not know how to make money off of them. With no ads in the mobile version and more users checking their accounts on their mobile devices instead of a laptop or computer, revenue is lost.

The following quote is proof of their revenue generation through the mobile platform:-

“Although the substantial majority of our mobile users also access and engage with Facebook on personal computers where we display advertising, our users could decide to increasingly access our products primarily through mobile devices. We do not currently directly generate any meaningful revenue from the use of Facebook mobile products, and our ability to do so successfully is unproven.”

This will leave many with one question in their mind. Why purchase a mobile app that does not currently make money for their user base? With no ads in their application and no other means of revenue, Instagram has a very large user base to support with minimal resources. Instagram has state their goal has always been to build a large user base and then begin serving them ads. Even still, $1 billion dollars is a lot of money to make up for.

Instagram As Competition To Facebook

Instagram CEO Systrom made a statement that they wished to “help every user on the earth share their lives and discover the world through a series of beautiful images.” If Facebook felt Instagram could pull it off, they very well could feel their model would be threatened by it.

The biggest issue seen here is that Instagram only offers it’s users the ability to take a photo, use one of many filters built in to the application to alter it, and then post it for their friends and family to view. That would hardly seem to be a threat to Facebook given it is only a photo sharing application. There are already many filtering applications available to mobile users and Instagram would be just another sharing network to sign up for.


Is Facebook After Data?

The strongest arguement for Facebook’s aquisition would be the bottom line, data. With Instagram users having uploaded over 100 million photos which are geo-tagged and personal, Facebook could be looking to use this data to further their ad targeting. Facebook already has a massive amount of personal data on most of it’s users and there are 100 million photos uploaded to the social site every day. The tagging of these photos also include business locations and other people who also have their information on the site. With this massive amount of user data, Facebook could be making strides to further their ad targeting.


Keeping Instagram Away From Competition

The aquisition of Instagram could also have simply served as a means to keep it away from Google and Twitter, two of Facebook’s largest competitors. This also brings Instagram’s engineering team to Facebook. The addition of these key members could be what is needed to vastly improve on their mobile application and realize true gains through a restructuring of both their mobile and web interface. One thing is for certain, Facebook is deeply rooted and will do what they must to stay in the game.

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Smart Phone by Facebook

After the recent Facebook IPO at Nasdaq, so many news are coming up from Facebook. Lately we heard about the Facebook browser, that Facebook is going to buy Opera! & now yesterday, BITS reported that Facebook is going to launch a smart phone by the next year.

In 2010, Facebook had already given a try to build a smart phone but due to several complexities, it then gave up the plan. Hugo Fiennes, a hardware manager from Apple who has started his own company said that, “Building isn’t something you can just jump into, you change the smallest thing on a smart phone and you can completely change how all the antennas work. You don’t learn this unless you’ve been doing it for a while.” Fiennes who was with Apple till the launch of 1st 4 iPhones further said that, “Going into the phone business is incredibly complex.”

Zuckerberg has already hired several software and hardware engineers of Apple who have worked on iPhone & iPad. But building a smart phone is indeed a work of complexity. The giants like Hewlett Packard & Dell have also struggled a lot in building smart phone but they dint succeed.

BIT has added in its report that “One engineer who formerly worked at Apple and worked on the iPhone said he had met with Mark Zuckerberg, Facebook’s chief executive, who then peppered him with questions about the inner workings of smart phones. It did not sound like idle intellectual curiosity, the engineer said; Mr. Zuckerberg asked about intricate details, including the types of chips used, he said. Another former Apple hardware engineer was recruited by a Facebook executive and was told about the company’s hardware explorations.” Asking such questions doesn’t seem to be the qualities of a market leader!

Facebook hasn’t confirmed or denied about its project to build a smart phone but a statement was been pointed which said that, “We’re working across the entire mobile industry; with operators, hardware manufacturers, OS providers, and application developers.”

One of the Facebook employees stated that, “Mark is worried that if he doesn’t create a mobile phone in the near future that Facebook will simply become an app on other mobile platforms.”

For all the above points, I feel that Facebook is currently having billions of dollars with itself, which it can invest in any revenue generating project. But Facebook should consider that its earnings per share don’t fall down. The share price of Facebook has already fallen down at Nasdaq. On Friday, the share was closed at $31.91 (the IPO price being $38).

I just hope that Facebook is not just blindly trying to capture Google’s market. Yesterday we heard that Facebook is going to buy Opera which would lead to fall in market share of Google Chrome. Now that Google has acquired Motorola ($12.5 billion), we are hearing the news that Facebook is going to build a smart phone! Zuckerberg shouldn’t make plans just to gain more leverage from its competitors.

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Facebook Browser

Browser war is going on. The companies are coming up with new browsers & trying to compete with the old ones in the market. Recently, Yahoo launched its own browser, Yahoo Axis, to compete with the giants like Google Chrome, Mozilla Firefox, Internet Explorer, Opera, Safari etc…

After considering this competitive market, the social network giant, Facebook, is been heard of coming up with a browser which will help you to stay updated with your social life, with the help of inbuilt plug-ins and features.

Recently Facebook bought Instagram for $1 billion & yesterday Pocket-lint reported that according to its trusted sources, the social network giant is going to either buy Opera browser which has around 200 million users across the globe. But Facebook hasn’t yet commented anything on this, so this may be a rumor too.

After the Facebook IPO (Initial Public Offering) at Nasdaq, which has brought them billions of dollars, Facebook will surely be having excess cash which it needs to invest & earn out of it, so as to meet the expectations of it shareholders. Thus it could be quite possible that Facebook could take over Opera. Zuckerberg will surely consider the potential growth of Opera browser, especially in the mobile world.

If Facebook won’t buy Opera, then I personally feel that there would be some other big new that would come from Facebook. The simple reason behind this statement is for considering the idle cash with it, which would make no good if not invested!

So do you think after hearing this news, will Google take any step to preserve its market share of Google Chrome..?? Will 900 million users on Facebook cause harm to other browsers, if Facebook would buy Opera..?? Will Facebook be benefited if it takes this step..??

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