November 28, 2014

Crazy Valuations: Instagram Deal Worth More Than New York Times

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.

Instagram

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.

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Anita Campbell - CEO


Anita Campbell Anita Campbell is the Founder and Publisher of Small Business Trends and has been following trends in small businesses since 2003. She is the owner of BizSugar, a social media site for small businesses, and also serves as CEO of TweakYourBiz.com.

10 Reactions

  1. Anita: Will Pinterest the next big deal? I am an avid user of Instagram. I like the recent feature that the photos are automatically stored in a special Instagram photo album at Facebook. It would be interesting to hear some comments from the folks at Flickr…

    • Hi Martin, It is clear that images are hot. A few years ago everything was “all video all the time”. Today in 2012 it is images.

      I just wonder how much of it is about having a new shiny toy, though. We seem to go through waves of what’s hot, with sites rising quickly and cooling off just as quickly, it seems.

      – Anita

      • In a way it is a new shiny toy and Instagram has several photo app competitors. But they have been very good to stick a simple and usable product. The thing is that you see many mashups, e.g., photos on pillows, external photo albums, etc.

        Color was an app that was a rising star and then faded out. I think that this product was too hard to use and had privacy issues.

  2. Thanks for this news update.

    Since I have a Blackberry, Instagram is Greek to me.

    But, I’ve certainly heard of it, and I see it used a lot.

    But, a billion dollars?

    I think I see it…it’s a bubble, and it’s gonna burst!

    Eventually.

    The Franchise King®

    • Hi Joel,

      I agree with you — I sense a “bubble” feel to this. I mean, Instagram is neat, but it has no revenues. In 5 years, I think we’ll look back and marvel over the level of interest in it.

      Same with Pinterest — is it interesting? Sure. But is it the greatest thing since sliced bread for all businesses? I don’t think so. When you have to contort yourself into figuring out how to use something like Pinterest, which is what many businesses have to do (it’s not a natural fit), I suspect interest will decline rapidly and then level off to where it should be, once everyone gets over the newness.

      – Anita

  3. WOW! A 2 year old company worth more than the New York Times? I don’t know how people can look at this deal and not see the massive overvaluation.

  4. Anita: New York Times vs. Instagram. Old media vs. new media. The world of business is changing rapidly. Glad to see those young founders do so well. Something tells me though, that Mr. Zuckerberg just bought a potential competitor.

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