Was USD 1-B too much or too little for Instagram?

Katherine Visconti
In business/acquisition terms - what does $1 billion really mean?

MANILA, Philippines – The biggest social network on earth, Facebook bought mobile photo-sharing app/startup Instagram for a jaw-dropping $1 billion dollars on April 9. 

That makes the year-and-a-half old company, launched in October of 2010, worth:

  1. More than the 161 year-old New York Times Co. with a market capitalization of $949.46 million, as of publishing.
  2. 53 times more than what Pancake House spent to acquire Yellow Cab Pizza in 2011.
  3. Equal to J.K. Rowling’s networth in 2010 after all the Harry Potter novels were published and 6 of the 8 Potter films had debuted.

Based on a report from TechCrunch the deal with Facebook valued the company at more than double its worth based on its latest round of funding just a week before it was acquired by the social networking giant. 

Finance and tech pundits are praising and haranguing the deal. 


Critics point out that the deal puts the value per employee at a whopping $77 million a head since the startup only has 13 employees.

That’s 15 times  Apple and Google’s valuation per worker reported The Atlantic

Moreover, $1 billion is a hefty sum for a company with no public business model. The lone app is free and carries no advertisements. 


But perhaps Facebook didn’t have a choice since Instagram was poised to be such a powerful competitor. In its very first day on the Android platform the app was downloaded 1 million times.  

The company already has more than 30 million users and its recent round of funding would have poised it to become more powerful. 

Already the company said users were uploading more than 5 million pictures a day. As any Facebook user who has spent hours clicking away on pictures knows, photo sharing and viewing is one of the social networking sites core functions.  

As Business Insider points out smartphones are set to overtake personal computers and tablets as global internet devices. Their report explained that since the future will be people sharing the pictures through their phones, it’s worthwhile to buy the mobile photo sharing app now.

Moreover, in acquiring Instagram, Facebook may get some of the brand’s good will. Also Facebook will have more power to dictate how Instagram interacts with other social sites that utilize the app, like Twitter. 

Mark Zuckerberg said in a statement on Facebook that his company would “help Instagram continue to grow by using Facebook’s strong engineering team and infrastructure.”

A stronger Instagram could be bad news for rival photo services like Google’s Picasa and Yahoo’s Flickr. But undercutting those rivals would help Facebook keep its status as the largest photo-sharing site. – Rappler.com

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