The news sounds like something out of a novel: a high tech company with 13 employees and less than 2 years old, gets acquired for a breath-taking $1 billion by Facebook. That was the news announced earlier today all over the tech Web.
The company is Instagram. In case you’re not familiar with it, Instagram is an elegant photo sharing application you use with an iPhone or Android. Photos, like mobile, are a hot trend today. Put the two together and, well, you have a billion dollar deal (at least in Silicon Valley).
Facebook, the social networking giant, plans on an IPO soon. As to the why of the acquisition, it makes sense when you think of how important photos are on Facebook. AllThingsD noted earlied today:
Facebook is currently the largest photo-storage site in the world, with an average of 250 million photos uploaded per day, as Kara Swisher notes here. A 2011 Pew Internet study showed that 20 percent of Facebook users cop to commenting on a Facebook photo at least once a day. Many felt that Instagram, with its user base of around 33 million — and with about a million of those users having signed up immediately after the Android version of the mobile app launched last week — was increasingly becoming a real threat in the social networking space.
And there’s another small-but-noteworthy value-add here for Facebook as well: Your location.
Instagram, which was created by Kevin Systrom and Mike Krieger back in March of 2010, has an easy-to-use geotag feature in its photo-sharing process that lets users tell everyone exactly where they were when they took their photos.
Om Malik agrees, in a more colorful fashion.
But what if you’re an employee in an “old media” company? Wonder how it feels to know that the venerable, blue chip company you work for — The New York Times — has a public stock value less than the $1 billion the younger-than-two-year-old-startup fetched? Of course, the two valuations are not exactly apples to apples – but similar enough to marvel over.
Seems like a crazy valuation, but as I pointed out yesterday, investment interest in tech startups is hot again. The Facebook-Instagram acquisition is just one more sign.