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Comment by Mystalic | Hacker News Reader

Something like that. Facebook saw that Instagram was adding users fast and dominating mobile (a weakness of Facebook's). The plurality, if not the majority, of Facebook activity revolves around photo sharing and photo interactions (photos get way more engagement than the sharing of links).

So Zuck decided to take them out of the competitive landscape now, while it could still afford to, rather than risk Systrom turning Instagram into a major social network that siphoned away significant amounts of activity from Facebook.com

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If that's really the case then there's no way Facebook is worth what (most) people think. Instagram launched in October 2010 and were acquired with only 13 employees. If a tiny company like that even has a chance to dent Facebook's market position then they are in an extremely precarious spot, IMHO.

More startups like Instagram are going to appear. No one can predict when or where but given the low barrier to entry, it's going to happen. If it costs Facebook $1B per "bullet" to kill them then they are going to run out of bullets.

A lot of startups "like" Instagram already exist, but ONLY Instagram has 40+ million users, that's the difference. Just because 100 more startups get created in this space doesn't mean any of them will acquire a sufficient userbase to threaten Facebook.

I'm thinking that his point (which I agree with) is that if a photo-sharing app with twelve people and no revenue can come from nowhere in less than two years to threaten Facebook's very existence, Facebook may not be worth $100 billion. I think the crux of this debate is whether you think Instagram was poised to become a real threat in the social space to Facebook. I think Facebook overreacted, and given this information (that Zuckerberg essentially bought it up himself) the disconnect from a realistic valuation seems even more likely. But then again, they may never get a chance to buy up companies with stock that possesses so much hype.

True. But on the other hand, look at RIM (Blackberry) and Apple (iPhone). Any large incumbent can be displaced. They take longer to die because they have cash, but they die nonetheless.

"Everything is worth what its purchaser is willing to pay for it"

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