Like many others, Iâm still coming to terms with the price paid yesterday by Facebook for the fun, photo phenomenon called Instagram.
And for the average person, the shock is not surprising â I mean $1 billion for a 13 person outfit with no revenue looks to be silly but on closer inspection, the value is clearly all in those 30 million active and fanatical usersâŠand more about them later.
Strategically, the opportunity to offer an Instagram-type product achieves two things for Facebook:
At a general level, it will help keep their competitiveness alive and well
At a specific level, it should play a key role in their efforts to upgrade their mobile offerings
Financially, according to those in the know, the billion dollar price tag is right in line with other recent tech deals such as Zynga. The fact that these evaluations are considered sensible is further evidence that I am in totally the wrong business!! But thatâs a separate discussion.
So strategically and financially the deal makes sense but I am not so sure when looked at from a branding point of view. Let me explain. Instagramers (or certainly the ones that I know) are ultra passionate about their brand at a very individual level. And remember, not all of this Instagram tribe are necessarily Facebook fanatics. In the longer-term, this may or may not matter but in the short-term, we should not gloss over the fact that this great, new, fun hobby brand has just been purchased by one of the biggest and most polarizing tech brands in the business. It is almost inevitable that there will be a backlash, not from their 13 employees but most definitely from a segment of their users.
Itâs as if that wonderful bed & breakfast inn in Tahoe that you discovered last year has just been purchased by Best Western or Marriott. It just doesn’t feel the same anymore. Most importantly, your relationship with the purchaser is different. And for a more linear example, it would be like Zipcar selling to Hertz.
In the case of Instagram, it will depend on Facebookâs sensitivity towards the Instagramers. Facebook is a huge, mature, adult brand. Instagram is like a new born baby brand. Brands such as these sit at two different ends of almost every spectrum. The emotional connection between a recently discovered embryonic brand is very different from the mass appeal of a titan brand like Facebook with 845 million users worldwide
From a branding perspective, Facebook will have to proceed with great care otherwise those loyal and fanatical Instagramers will simply walk to one of the many Instagram-like services. So, at the end of the day, I see this deal as much about the Instagram user as it is about Facebook and that puts the consumer, as ever, in a very strong position.