Facebook Inc (NASDAQ:FB)’s Acquisition Of Instagram — Boon or Blunder?


When it comes to discussing Facebook Inc (NASDAQ:FB)’s $1 billion acquisition of Instagram back in 2012, there are two camps, some that see the value and others that believe it was an overpayIt appears to some that Facebook spent an outrageous amount on an asset that has added little to its business. Additionally, some believe that Facebook could have internally come up with a better version of Instagram faster and in a low-cost fashion.

Others contest that as of September 2015, Instagram had bested Twitter by over 80 million users. Twitter even after its recent fall in stock price has a market cap of $10.12B, 10 times what Facebook paid for Instagram. In a blog post, Last September, Facebook Inc said Instagram reached a milestone of 400 million active users. Interestingly, over 100 million users have joined the app only in the last nine-month period, showing that the property is still experiencing rapid growth and has a shine to users, that Twitter doesn’t.

ZDnet not convinced

ZDNet ranked Facebook Inc (NASDAQ:FB)’s acquisition of Instagram among the worst of tech deals in the recent years. The site cited the fact that not only did Facebook seem to pay too much for a startup whose future or success was uncertain, but changes the company made to Instagram app after the acquisition haven’t been of much help. For example, the loss of Instagram API integration with Twitter’s platform has pissed off many, especially the early users of the photo-sharing app. Perhaps that could go a long way to explain the slow user gain at Instagram.

Additionally, the issue of breach of photo usage rights on Instagram has also not helped matters for Facebook Inc (NASDAQ:FB).

Boon or Blunder? 

Facebook’s purchase of Instagram elicited strong emotions from the very beginning. Many initially believed it was an overpay, while valuations of properties like Twitter or even Snapchat have made it seem more reasonable. That being said some on the tech side point to the fact that Facebook could have easily reproduced the service, but it can be difficult to get things to catch even if the tech is easy to reproduce. Others point to the fact the acquisition provided a sort of expensive business protection for Facebook, stopping a competitor from purchasing it and gaining scale in the social media world to build a legitimate competitor to Facebook. The jury remains out but it’s interesting to consider the various view points.

Neha Gupta

Neha Gupta has been in the financial space for over six years now. Gupta earned her MBA degree from Symbiosis Centre of Distance Learning in 2009 and her passion for finance led her to pursue Chartered Financial Analyst (CFA) course. She has successfully completed Level II of her CFA. She is a veteran in article writing, which is depicted in her numerous pieces published on SeekingAlpha, Nextiphonenews, InsiderMonkey, MarketWatch, and Techinsider. Her crisp and eloquent writing finds its best place in Researchcows, where emphasis is given on developing rich content for various websites, products, business plans, trainings, and book writing.

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