Say what you want about Zuckerberg but the guy was well ahead of his time and could see how things would evolve and what tick with people brains.
Also, as it was made that Instagram only had 7 employees when they were purchased, that's actually one of major reasons why the acquisition worked so well. 7 employees for an application of that scale is not "swift and agile", it's criminally understaffed. After the Facebook acquisition, Facebook was able to easily redirect some of their hires to work on Instagram which allowed Instagram's original workforce to actually be able to worry about things other than just keeping their heads above water. It's definitely not ridiculous to credit some of Instagram's success to the acquisition itself.
FB was pretty slow to monetize Instagram, and they still had hired 100s of people pretty quickly after the acquisition.
Before facebook bought Whatsapp they only had 5 employees. But they had the best engineers for the task at hand. In fact they’re famous for handling 2 million TCP connections on a single server due to much of their engineering decisions (including choice of tech stack). And it’s not like they weren’t generating revenue. Before facebook acquired them, their $1 fee earned them $1billion the first 9 months.
And additional features are going to add massive complexity and decrease your ability to scale relatively quickly. Sure, with the right engineering you might be able to run a relatively light operation if you have a feature-set well thought out, but as soon as you want to add any other thing-a-mo-bob to the operation it gets much harder.
Whatsapp also only had a couple hundred million users back in 2014. So they’d have no way to make a billion even if they charged everyone. Which they didn’t. They barely charged anyone.
Oculus while not a huge success was also only bought for a few billion. Not a bad loss. Parse wasn’t bought for that much. It might’ve not been a loss either.
When two of their bigger acquisitions are slam dunk successes or just successes, that’s a pretty good record.
For one: we still don't really really understand network effects. There's huge value to being Facebook (you're forced to be there because all your friends are there and most nowhere else), but people also switch platforms for reasons that are not excellently understood. And when I say bubble I don't mean this or that company -- Silly Valley big money is basically all bet on network effects.
(I.e. Instagram is worth $100B under the premise that I can't build an Instagram killer (that actually kills it) in a short period of time. And jeez, it's not fundamentally different from Geocities + Frontpage, just has better UX)
Before I’d run different affiliate offers through them. Though back then for those, Instagram wasn’t that big. Might start again if the opportunity works out.
The returns are good or it would be crazy to put that much money into the ads.
The point is that due to network effects (which lock users in to a platform), ads are monopoly-priced. But network effects are not super well understood and platform collapses do happen.
So we know the ads market to be large -- or at least people on HN are testifying to that effect, but we don't know that Facebook or MySpace or Lycos get to appropriate it to a long enough period of time that current valuations make sense on a no-bullshit NPV basis.
A fair point was made elsewhere that multiples (which are more or less like stock market folklore, but still allow for comparison across multiple industries) in these companies are relatively modest.
Did he really predict that, or did he just see an upcoming potential competitive threat and buy it?
I feel bad for the founders of Instagram. They could have been the next Zuckerberg(s) (as Instagram seems to be taking over as Facebook seems to be starting to fade), but instead they're subordinates in Zuckerberg's empire.
Ok. Beyond that, why do you assume the valuation would be exactly the same had they not sold to FB?
That would be half a _billion_ and, generally, I don't "feel bad" for people who don't attain their dream of climbing the Forbes leader board (assuming that is even a goal for these two.)
Having 11 people try to manage a site of that scale is just asking them to keep doggypaddling to avoid drowning.
Like Snapchat, you mean? The risk is that, failing to acquire Instagram, Facebook could have built a clone and turned their massive user base to it. Instagram could have been in a distant third place. We'll never know.
That's like feeling bad for someone who sold bitcoins at $10. The company they sold was worth $1bn (to Facebook) at the time. It was not worth $100bn.
https://www.crunchbase.com/organization/instagram#section-lo...
The link I pasted simply had a list of Instagram's financing rounds.
April 5th, 2012, Series B $50m
April 9th, 2012 Purchased by FB, $1b
Several days before being acquired by Facebook, Instagram raised a $50m Series B on a $500m premoney evaluation, which gave investors 10% of the company.
Typically in order to grant 10% worth of preferred stock for a raise, the company has to increase the number of shares. If there were 100 shares prior to the raise, and a had 1, I would have 1/100 or 1%. If there are now 110 shares, and I still have 1, it's now 1/110 or < 1%
A few days later, the company was sold for $1b.
1/100 * 1b = $10,000,000
1/110 * 1b = $9,090,000
In my contrived example about dilution, with my 1/110%, I lost out ~$1m, and for seemingly no benefit to the company.
Bringing it back to my original comment, employees as a collective, would have lost out significant money, for seemingly no benefit, while Sequoia benefited tremendously.
I should caveat my post:
--This is pure speculation on a number of fronts. Any number of scenarios could be true (even if unlikely)
* IG could have had 10% shares already allocated in reserve for a Series B, and never had to issue more. Employees would still in effect lose out on money, but not because of dilution.
* With that $50m in cash, IG could have paid out hefty bonuses to employees. IIRC at the time of acquisition IG had ~19 people.
* IG could have issued anti-dilution to everyone, keeping relative % near the same.
* The SeriesB may have had to happen in order for Sequoia to agree to the sale.
>A few days ago it was rumored to be valued at $500 million. A few months ago it was $300 million. Its last round — just a year ago — valued the company at $100 million.
It was already the hot thing when he bought it. (https://gigaom.com/2012/04/09/here-is-why-did-facebook-bough...)
The other numbers are good, but then other companies also grow at similar rates. How come Instagram is the $100B valued company with 1B users and Whatsapp has over 1.5B users? And both are growing still. You’d think there would be another company coming at them.
For Whatsapp as a messenger the only service close to them is Messenger with around 1.4B users (you could say WeChat or Line/KakaoTalk as well though they are mostly popular in east Asia only). And Messenger is a sister product.
YouTube is a similar knock out success. Huge mindshare beyond its huge numbers, but it isn’t a profit machine like Instagram.
So it’s just Facebook that controls the 4 biggest social networks/messengers outside China. Along with some of them being the fastest growing services as well to this day.
All of this is to again say it wasn’t completely obvious Instagram would become this big. Other companies also grow and get valued highly quickly. And almost no other companies or services get as big as Instagram, which is still growing.
Finally, the zeitgeist at the time of the purchase was of shock at the price tag. Almost no one thought it was worth the billion dollar price.
Yes, just not a way to make something that improves our lives.
Or even if you manage to make something that improves our lives, advertising is an incentive to pervert it and hold it back (e.g. you create a social network so people from all over the world can meet, then ads make you cripple it, force feed BS to them, milk them with spam, exploit their private data, and so on...)
Instagram would have died an early death if you had to pay for it, and hiding certain features behind a pay wall would alienate 90% of the users.
That would be a bonus.
>hiding certain features behind a pay wall would alienate 90% of the users
Only before they have conditioned differently from an industry that has been legally allowed to trade private information for ad money.
I honestly don't think that would be a loss for humanity.
I have also bought many products from other businesses that have made my life better. In most instances, I have only become aware of these products because these businesses have spent money on ad campaigns.
That could have been a valid argument in 1970.
Today we have the internet. Instead of advertising it's not perfectly possible and easy to have other means of discoverability:
a) professional product reviews - a review site visit or Google search away
b) actual user reviews -- an aggregator site or Google search away
c) the product makers marketing material on their own website
d) blogs from people using the product
e) forums with people exchanging advice/complaints about the product
f) videos of people unboxing, using, showcasing, etc the product
g) the specs of the product, product manual, photos, etc online
h) online communities around a product category
i) for digital products, one could also try a trial/time limited/shortened /watermarked version of them
j) for products we encounter physically on some shop's shelves and want to know more about them, a quick Google search or QR Code can take us to the product page (and/or all of the above)
Unlike advertisement, none of these give an unfair lead to the maker than can spend more campaign money.
What's best, most of these add informational value (like scores, real world complaints, professional reviewing, etc) that ads, by definition, don't have.
We literally have more ways than ever to discover products, and to find the best products. Advertising is just random producers (random quality wise: just the company with the bigger pockets) shouting to make their wares stand out.
If any of these are on the internet, then people there will be pixel trackers, and people are going to measure the distinct number of impressions. I don't think this is a bad thing.
If we stretch the notion of advertising to mean "anything that can bring something to one's attention", then yes.
In that case I'm making explicit that by "advertising" in my first comment I referred not to these things, but to what's colloquially referred to as "advertising" -- namely paid tv ads, paid banners, sponsored posts on Facebook, and so on.
Not user forums, not legitimate reviews etc.
>If any of these are on the internet, then people there will be pixel trackers, and people are going to measure the distinct number of impressions. I don't think this is a bad thing
Well, I don't think "measuring the distinct number of impressions" in those kind of websites is a bad thing either.
What I said I consider bad is advertisements, that is getting money from a business for pitching THEIR message (as opposed to objective facts or a reviewer's/user's subjective review), selling your users' private info to them or using it to target them with ads, etc.
Let's imagine for a moment that it was made illegal for a content producer or social website etc to take money, in any kind of form, directly or indirectly, from any product maker, or anyone selling something (that is, no selling ads themselves, and no being paid to show ads).
What would remain on the web to discover products would be all the above I've described.
Kim Kardashian has a 110 million followers. After the Russians (or whoever...maybe just that "400 pound dude in the basement") get her to become the next president I am waiting to see what boywonder shows up and says to Congress.
We know what he and his exec staff thought about fake news before the election. Now who here thinks fake imagery is not a thing? Just take a look at the content produced by the top 100 accounts.
There is going to be a special place in history for the damage boywonder has done. People will have to invent new terms to describe it. Nothing like it has happened ever before.