Never before in corporate history has one company paid so much money, $1 billion dollars, for another company that was not even producing revenue, let alone being a viable and profitable company. On the surface this could indicate some serious worry, or even panic, by the powers, or is it power, that be at Facebook. Others see the move as very smart for several reasons. It eliminates a very viral, albeit young, competitor and helps backup Facebook against fellow tech giant Google. Instagram was quickly becoming the only viable competitor to Facebook in the online photo-sharing world.
When Google paid a huge chunk of cash for YouTube many tech savvy people chuckled, but the purchase turned out to be genius. Ownership of YouTube is now a major part of the Google plan. Facebook may see Instagram in the same light.
Already there are rumblings for Facebook as Instagram users are in a fruitless mini revolt over the purchase of the company they use daily. In just a short while, more than 30 million members have flocked to the roles of Instagram. Instagram allows users to play some easy but popular tricks with the way photos look and send them quickly and easily to friends.
Some pundits are speechless when asked why Facebook might spend $1 billion dollars for a company that has no revenue. Perhaps these people have forgotten that Facebook operated in a non revenue-producing manner for some time and it certainly did not hurt Facebook. To decision makers at Facebook the lack of revenue at Instagram may have signaled the presence of a real savvy competitor that needed to be taken out of the market immediately.
Since analysts have already estimated the value of Facebook will be at $100 billion after it is listed publicly, it will be easy to see if this purchase of Instagram has been a help or a hindrance.