By now, it’s probably been brought to your attention that Facebook bought Instagram for a billion dollars on Monday, valuing the two-year-old photo-sharing service at approximately $100 million per employee. Predictably, everyone is asking why.
More than one reputable journalist has covered this story by referencing Facebook’s continued inability to create a compelling, intuitive mobile app, which strikes me as absurd. Facebook isn’t buying Instagram’s ability to create a great mobile app.
Do you honestly believe that Facebook couldn’t create a solid mobile UX for less than a billion dollars?
While Instagram was quietly courting a generation of teenage smartphone users, you were busy reading front-page headlines about how Facebook just could not stop getting grandmothers to sign up. If you were over the age of 55, you were totally psyched on Facebook in 2011! You couldn’t get enough of the stuff!
Facebook knows they can’t build a mobile UX that looks and feels different from their web interface. Your grandmother would freak out. And they can’t significantly change their web interface. Because your grandmother would freak out.
And Facebook certainly isn’t buying Instagram’s 30 million users; they’re all on Facebook already.
So Why Is Instagram Worth a Billion Dollars?
Facebook is paying a billion dollars for the way that Instagram’s users think. It is buying the way that Instagram has trained the market. It’s buying an up-and-coming generation that thinks about their status as a photo.
Facebook’s users were trained on technology from a generation ago: the computer. They were trained to update their status by typing words that corresponded loosely to their current goings-on. Five years ago, this was, hands-down, the fastest and most frictionless way to communicate with one’s social circle.
Sharing photos was more complicated, involving physically connecting two pieces of hardware, manually transferring files from one device to another, and then uploading those photos to a piece of software. As a result, users uploaded photos irregularly and in bulk; they created albums.
Still, Facebook’s cloud hosting of photos, photo tagging and photo sharing were ridiculously revolutionary when they first launched. It’s a key reason the company was able to win the lion’s share of the U.S. market in such short order. Certainly, Facebook remembers how important photos are.
Not that they need a lot of reminding. If you can think of fresh angle from which to approach a Pinterest story, authorities have requested you contact your local tech editor immediately. Media coverage of Pinterest has become something of a national export; it’s practically your civic duty.
At this point, it doesn’t take a Mark Zuckerberg to figure out that sharing information via images is the next big thing.
A Picture Is Worth a Billion Dollars
There’s a whole lot of super important stuff that can’t be communicated via an image, but, really, most of what you’d want to tell your friends about on a day-to-day basis is, at the least, more engaging when supplemented visually. You just started a new job. You got the acceptance letter to your dream college. You’re in line to see The Hunger Games. Your kid cried at the zoo. Your dog is wearing a wife-beater. Whatever. It’s better with a photo.
But Facebook hasn’t trained you to post a photo whenever you have a thought. Facebook has trained you to type in a status update whenever you have a thought, and upload photos as albums later. They know that social status-sharing via images is the future, they just can’t seem to train the bulk of their users to think like that. And it’s not for lack of trying.
Instagram’s users have been trained differently. Not only were they trained on a completely different technology – one where sharing a photo takes essentially the same amount of time as sharing text – but Instagram’s simple photo filters taught them that every photo they take, even on a smartphone, can be breathtaking.
Instagram convinced users that every image from their life – their stupid cat, the boring tree in their backyard, their hopelessly awkward teenage face – could be as visually stunning in reality as in their mind. It’s a positive feedback loop that would arguably work even as a single-player experience.
As a result, Instagram’s 30 million users started thinking about status updates as photos, not text. When they think of something really important that they want to tell their friends, they think about communicating that information as an image.
That’s what Facebook’s paying for. They can’t figure out how to use a billion dollars to train their own users to think that way, so they’re betting that the 30 million folks on Instagram will prove a more effective behavior-modification tool than EdgeRank.
Will it pay off? That’s a question well above my pay grade. My hunch is that, even at a billion dollars, it’s still less expensive for Facebook than the risk of it being acquired by Google. When Zuck caught even the slightest whiff that Instagram was ready to sell, he probably asked them to name their price.
If you got to the end of this article, congratulations and thank you. I couldn’t figure out how to do it as a picture, and I remain an ardent supporter of the value of the written word. Now, if you’ll excuse me, my dog is humping a chair and I think it would look really good in Kelvin.
Sasha Pasulka is the VP of Marketing at Salad Labs and a digital strategist at Red Magnet Media. You can follow her on Twitter @sashrocks. More from Sasha Pasulka on GeekWire: Hey, startups, users aren’t free…. Why Facebook may surrender users to niche social networks. Editor’s note: Salad Labs is a sponsor of the Seattle 2.0 Startup Awards, presented by GeekWire.
Previously on GeekWire: A tale of two acquisitions: A few thoughts on the $1 billion bets by Microsoft and Facebook