Just when you were getting bored about whether we’re in another tech bubble, Facebook has reopened the discussion in dramatic fashion –buying super-hot photo-sharing app Instagram for a reported $1 billion in cash and stock.
Normally the question would be “is it worth it?” But this time, few in the tech world are even asking that: they’re just a) saying it’s not, and b) predicting a mass exodus of customers who don’t want to be associated with a "big business" like Facebook (who appear in danger of becoming the Microsoft of the social age).
Instagram has been a phenomenal success recently. They only had seven people working for them at the end of last year. When they launched an Android app a few weeks ago it saw 1 million downloads in the first 24 hours. The iPhone app already has over 27 million users. But a billion dollars? Why (and I’m not even mentioning direct revenue, as Instagram hasn’t got any)?
Perhaps there’s another way to look at it. One billion dollars makes no sense. But as Facebook are paying largely in equity, the more relevant question is: if Facebook is worth £100 billion, is Instagram worth 1 per cent of that? Quite possibly – in which case, the issue is Facebook, not Instagram.