# Facebook Throws Away A Billion Dollars **URL:** \ **Category:** In My Humble Opinion\ **Created:** [April 10, 2012, 2:56pm UTC](https://boards.straightdope.com/t/facebook-throws-away-a-billion-dollars/618367 "2012-04-10T14:56:18Z")\ **Posts on this page:** 20\ **Page:** 4
**Author:** ![Gangster\_Octopus](https://avatars.discourse-cdn.com/v4/letter/g/a8b319/32.png) [@Gangster\_Octopus](https://boards.straightdope.com/u/Gangster_Octopus)\ **Post date:** [April 11, 2012, 4:41pm UTC](https://boards.straightdope.com/t/facebook-throws-away-a-billion-dollars/618367/61 "2012-04-11T16:41:24Z")
I have to say I do not know a single person who uses Instagram, which might say more about me than Instagram, actually. ---
**Author:** ![VinylTurnip](https://avatars.discourse-cdn.com/v4/letter/v/b2d939/32.png) [@VinylTurnip](https://boards.straightdope.com/u/VinylTurnip)\ **Post date:** [April 11, 2012, 5:49pm UTC](https://boards.straightdope.com/t/facebook-throws-away-a-billion-dollars/618367/62 "2012-04-11T17:49:59Z")
> [@Larry\_Mudd](#): > > That is actually an _awesome_ idea. (Of course, the “operator” would be a waveform and a voice recognition API.) Thanks. If it takes off, send me a gift basket. ---
**Author:** ![An\_Gadai](https://avatars.discourse-cdn.com/v4/letter/a/d6d6ee/32.png) [@An\_Gadai](https://boards.straightdope.com/u/An_Gadai)\ **Post date:** [April 11, 2012, 8:05pm UTC](https://boards.straightdope.com/t/facebook-throws-away-a-billion-dollars/618367/63 "2012-04-11T20:05:47Z")
> [@Gangster\_Octopus](#): > > I have to say I do not know a single person who uses Instagram, which might say more about me than Instagram, actually. I’d say half the people I follow on twitter use it with some frequency. ---
**Author:** ![Steve\_MB](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/steve_mb/32/5339_2.png) [@Steve\_MB](https://boards.straightdope.com/u/Steve_MB)\ **Post date:** [April 19, 2012, 7:29pm UTC](https://boards.straightdope.com/t/facebook-throws-away-a-billion-dollars/618367/64 "2012-04-19T19:29:58Z")
> [@Gangster\_Octopus](#): > > One of the reason, I am guessing Facebook went for Instagram is so that Google wouldn’t be able to get their hands on it. Sounds like a [rock solid investment](http://www.giantitp.com/comics/oots0129.html). ---
**Author:** ![Evil\_Captor](https://avatars.discourse-cdn.com/v4/letter/e/f17d59/32.png) [@Evil\_Captor](https://boards.straightdope.com/u/Evil_Captor)\ **Post date:** [April 19, 2012, 8:02pm UTC](https://boards.straightdope.com/t/facebook-throws-away-a-billion-dollars/618367/65 "2012-04-19T20:02:58Z")
30 million people have used a useless piece of crap application. I bet their loyalty to Instagram is about as deep as Instagram’s color range. ---
**Author:** ![Larry\_Mudd](https://avatars.discourse-cdn.com/v4/letter/l/f14d63/32.png) [@Larry\_Mudd](https://boards.straightdope.com/u/Larry_Mudd)\ **Post date:** [April 20, 2012, 12:53am UTC](https://boards.straightdope.com/t/facebook-throws-away-a-billion-dollars/618367/66 "2012-04-20T00:53:11Z")
I think that’s more dismissive than is reasonable. Instagram is as good as your friends. If your friends use it well, it’s pretty awesome. My favorites aren’t even close friends; worthwhile just for an old roommate who lives in Germany and is an excellent photographer who wanders around Europe providing a steady stream of calendar quality pics which aren’t filtered into absurdity. Yes, there’s the girl at work who snaps ten thousand close pics of her face and applies the ugliest effect possible, but that’s easy to unfollow. It’s the spontaneous snap-crop-share that gives the app value for the user. ---
**Author:** ![MetroGnome](https://avatars.discourse-cdn.com/v4/letter/m/8e7dd6/32.png) [@MetroGnome](https://boards.straightdope.com/u/MetroGnome)\ **Post date:** [April 20, 2012, 4:15am UTC](https://boards.straightdope.com/t/facebook-throws-away-a-billion-dollars/618367/67 "2012-04-20T04:15:45Z")
Is the “brilliance” of this buy any more tarnished by the fact that the deal was apparently made by Zuckerberg [without consulting the board](http://online.wsj.com/article_email/SB10001424052702304818404577350191931921290-lMyQjAxMTAyMDEwNzExNDcyWj.html)? Maybe he wanted to make all his rash decisions before there are public shareholders to answer to. ---
**Author:** ![Lantern](https://avatars.discourse-cdn.com/v4/letter/l/d26b3c/32.png) [@Lantern](https://boards.straightdope.com/u/Lantern)\ **Post date:** [April 20, 2012, 6:17am UTC](https://boards.straightdope.com/t/facebook-throws-away-a-billion-dollars/618367/68 "2012-04-20T06:17:18Z")
I haven’t followed this closely but it was discussed on Leo Laporte’s TWIT podcast. The panel seemed pretty skeptical and I have to agree with them. Instagram seems like a fun app but most of its users are on Facebook anyway. Ultimately it’s just a photosharing app with some fun filters. I don’t see the kind of depth and variety of interaction that you can get on Facebook so I am not sure that you can justify comparable ARPU numbers. I don’t think it would be that difficult to switch away from Instagram to some other similar app. Along with Zynga’s 180m acquisition of Draw Something, there does appear to be a bit of a bubble in the social/mobile tech space. Of course as mentioned Facebook itself probably benefits from this in its IPO though I think it has a better chance of justifying its valuations than some of the smaller companies. ---
**Author:** ![fifty-six](https://avatars.discourse-cdn.com/v4/letter/f/5daacb/32.png) [@fifty-six](https://boards.straightdope.com/u/fifty-six)\ **Post date:** [April 21, 2012, 11:03pm UTC](https://boards.straightdope.com/t/facebook-throws-away-a-billion-dollars/618367/69 "2012-04-21T23:03:33Z")
Facebook seems to be really proud of how much time each user spends on average at their site. I think that Facebook likes the idea of users spending time altering photos while logged in to Facebook rather than Instagram and could up the time spent on Facebook to a considerable degree. Facebook’s growth I believe is in keeping users at the site longer and longer. I think we will see acquisitions and applications to encourage this. The question in can they monetize it. Facebook appeals to a persons ego and gossipy nature. It is why people stay so long on the site. I think as long as the company keeps nimble and moves with the times, buys out competitors it will be around for a very long time. People never get tired of their ego, spying on their neighbors and gathering gossip. It is addictive to many. ---
**Author:** ![Really\_Not\_All\_That\_Bright](https://avatars.discourse-cdn.com/v4/letter/r/e8c25b/32.png) [@Really\_Not\_All\_That\_Bright](https://boards.straightdope.com/u/Really_Not_All_That_Bright)\ **Post date:** [April 21, 2012, 11:22pm UTC](https://boards.straightdope.com/t/facebook-throws-away-a-billion-dollars/618367/70 "2012-04-21T23:22:59Z")
> [@Diceman](#): > > It seems to me that this is the same sort of thinking that causes lottery winners to buy solid gold rims for their car, and dumb crap like that. The imaginary sort? Nobody has made a “solid gold rim” for a car, much less bought one. Gold is soft and heavy. So soft and heavy that a solid gold wheel would probably collapse as soon as you mounted it. ---
**Author:** ![BigT](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/bigt/32/12044_2.png) [@BigT](https://boards.straightdope.com/u/BigT)\ **Post date:** [April 21, 2012, 11:50pm UTC](https://boards.straightdope.com/t/facebook-throws-away-a-billion-dollars/618367/71 "2012-04-21T23:50:54Z")
> [@Marley23](#): > > :smack: > _They don’t want to hire the Instagram employees. They want to gain the Instagram users._ Hiring the Instagram employees at big salaries doesn’t give you the users. If they did that, they’d have to spend more money as the Instagram employees developed a new app that would have no users and would be competing with Instagram. How does that make sense? And as already pointed out to you, you are wrong. Facebook doesn’t get new users from the acquisition don’t get more users because people who have one also have the other. Even the one person in this thread who didn’t know about the Facebook integration admits that they put the photos on Facebook. They are not getting any new users in this deal. > [@Larry\_Mudd](#): > > Google+, natch. Sorry, this was half of an uncompleted thought that didn’t make it all the way out of my thumbs - I had intended to contrast this with the way that one of the Excite portal’s most valuable assets (its search engine) was quickly rendered obsolete by the appearance of Google’s vastly superior search engine, and contrast that with how Facebook has been able to shrug off Google’s vastly superior alternative to _their_ product. Nah, you were right when you said Google. The company is who is embarrassed that they couldn’t compete with Facebook with their new product. Google+ is merely a product and can’t be embarrassed. ---
**Author:** ![pricciar](https://avatars.discourse-cdn.com/v4/letter/p/f4b2a3/32.png) [@pricciar](https://boards.straightdope.com/u/pricciar)\ **Post date:** [April 23, 2012, 9:21pm UTC](https://boards.straightdope.com/t/facebook-throws-away-a-billion-dollars/618367/72 "2012-04-23T21:21:58Z")
While the headlines say 1 billion dollars. The truth is that that number depends a lot on Facebook’s value. > **[That $1B for Instagram? It’s 23M Shares of Facebook + $300M in Cash (And a...](https://allthingsd.com/20120423/that-1b-for-instagram-that-would-be-23m-shares-of-facebook-and-300m-in-cash-plus-a-200m-termination-fee/)** > > That's almost $31 a share for Facebook! 23 million shares plus 300 million dollars. Instagram’s founders are probably more than happy with the 300 million, but, they will be even happier if Facebook’s stock can hold it’s value long term when it goes public. As far as Facebook is concerned, since the total valuation of the company is $77 billion, bringing Instagram into the fold was worth giving up less than 1% of the company. Looked at in those terms, I think the deal does seem a lot less insane. Facebook isn’t throwing cash away to purchase a company. They are acquiring the company by enveloping its founders into their fortunes. We’ll see if it works out for Facebook (I’d say whatever happens it has already worked out for Instagram). ---
**Author:** ![Larry\_Mudd](https://avatars.discourse-cdn.com/v4/letter/l/f14d63/32.png) [@Larry\_Mudd](https://boards.straightdope.com/u/Larry_Mudd)\ **Post date:** [April 24, 2012, 12:34am UTC](https://boards.straightdope.com/t/facebook-throws-away-a-billion-dollars/618367/73 "2012-04-24T00:34:46Z")
> [@BigT](#): > > Facebook doesn’t get new users from the acquisition don’t get more users because people who have one also have the other. This is completely insignificant if you have any consciousness of how Facebook delivers value to their clients. An ad impression delivered to someone who is sitting at home browsing the internet does not have the same value as an ad impression delivered to someone who is out on the town having a good time and happy to offer up their geolocational data to be correlated with the handy consumer profile that they’ve built up over the years - not by a long shot. ---
**Author:** ![JohnT](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/johnt/32/15048_2.png) [@JohnT](https://boards.straightdope.com/u/JohnT)\ **Post date:** [April 1, 2018, 6:03pm UTC](https://boards.straightdope.com/t/facebook-throws-away-a-billion-dollars/618367/74 "2018-04-01T18:03:48Z")
> [@pricciar](#): > > While the headlines say 1 billion dollars. The truth is that that number depends a lot on Facebook’s value. > > [Facebook Files S-1 in IPO Preparation - Kara Swisher - News - AllThingsD](http://allthingsd.com/20120423/that-1b-for-instagram-that-would-be-23m-shares-of-facebook-and-300m-in-cash-plus-a-200m-termination-fee/) > > 23 million shares plus 300 million dollars. Instagram’s founders are probably more than happy with the 300 million, but, they will be even happier if Facebook’s stock can hold it’s value long term when it goes public. As far as Facebook is concerned, since the total valuation of the company is $77 billion, bringing Instagram into the fold was worth giving up less than 1% of the company. > > Looked at in those terms, I think the deal does seem a lot less insane. Facebook isn’t throwing cash away to purchase a company. They are acquiring the company by enveloping its founders into their fortunes. We’ll see if it works out for Facebook (I’d say whatever happens it has already worked out for Instagram). Was browsing some old threads when this one popped up… as I like seeing how some of our predictions turned out, especially finance/market related, I thought y’all would be interested too is seeing how the collective wisdom of the SDMB fares against the real world in making predictions. I mean, we’re smarter than the average Board, right? As it turns out, when it comes to valuing social media companies [Mark Zuckerberg](http://mediakix.com/2017/12/how-much-is-instagram-worth-market-cap/) was smarter than all of us combined. Whoda thunk it? 😉 Instagram is now worth about $100 billion, which is greater than the 2012 valuation for _Facebook_. ---
**Author:** ![Dewey\_Finn](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dewey_finn/32/4222_2.png) [@Dewey\_Finn](https://boards.straightdope.com/u/Dewey_Finn)\ **Post date:** [April 1, 2018, 6:24pm UTC](https://boards.straightdope.com/t/facebook-throws-away-a-billion-dollars/618367/75 "2018-04-01T18:24:39Z")
If you buy the assumptions and estimates made in that analysis (“We applied a multiplier of 1.9 to this figure”), sure you can assign that valuation to Instagram. Now I don’t have a finance background, so I don’t know how valid that calculation is, but it seems to me that you could make other assumptions and estimates and come up with a much lower valuation. ---
**Author:** ![Dead\_Cat](https://avatars.discourse-cdn.com/v4/letter/d/9fc29f/32.png) [@Dead\_Cat](https://boards.straightdope.com/u/Dead_Cat)\ **Post date:** [April 2, 2018, 12:22pm UTC](https://boards.straightdope.com/t/facebook-throws-away-a-billion-dollars/618367/76 "2018-04-02T12:22:24Z")
You could, but regardless of that, the OP’s doom laden predictions have definitely not (yet) come to pass. Not to criticise them - I remember this OP and I’m pretty sure I agreed with it at the time! I still think the whole social media thing is built on sand, but then I don’t believe in advertising, so that figures. Thanks for resurrecting this thread, I too like to see how predictions have panned out. ---
**Author:** ![Dewey\_Finn](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dewey_finn/32/4222_2.png) [@Dewey\_Finn](https://boards.straightdope.com/u/Dewey_Finn)\ **Post date:** [April 2, 2018, 2:09pm UTC](https://boards.straightdope.com/t/facebook-throws-away-a-billion-dollars/618367/77 "2018-04-02T14:09:37Z")
Yes, the OP’s doom laden predictions were off. So perhaps spending a billion dollars on Instagram wasn’t a completely idiotic thing to do. But at the same time, I don’t buy that it’s worth 100 billion. ---
**Author:** ![Stranger\_On\_A\_Train](https://avatars.discourse-cdn.com/v4/letter/s/13edae/32.png) [@Stranger\_On\_A\_Train](https://boards.straightdope.com/u/Stranger_On_A_Train)\ **Post date:** [April 2, 2018, 2:52pm UTC](https://boards.straightdope.com/t/facebook-throws-away-a-billion-dollars/618367/78 "2018-04-02T14:52:29Z")
> [@JohnT](#): > > As it turns out, when it comes to valuing social media companies [Mark Zuckerberg](http://mediakix.com/2017/12/how-much-is-instagram-worth-market-cap/) was smarter than all of us combined. Whoda thunk it? 😉 Instagram is now worth about $100 billion, which is greater than the 2012 valuation for _Facebook_. The valuations of these Internet tech companies are based upon some hope of future revenue based upon a product or service someone will pay for, and specifically in some area where they either have exclusive control of the market or have some new offering that is so innovative that everyone will have to buy it, e.g. the IBM Personal Computer or the iPhone. The day that someone comes up with a plausible thesis for what Instgram could possibly offer to generate $100B in future revenue that couldn’t be readily replicated by some other platform, I’ll eat my hat. > [@Dead\_Cat](#): > > You could, but regardless of that, the OP’s doom laden predictions have definitely not (yet) come to pass. Not to criticise them - I remember this OP and I’m pretty sure I agreed with it at the time! I still think the whole social media thing is built on sand, but then I don’t believe in advertising, so that figures. It should be understood that while much of social media is built on the advertising model, the product is not advertising; it is data, and in particular, your personally identifiable information (PII). The ultimate goal of companies like Facebook or Google isn’t to just collect demographic data that is of general interest to marketers looking at the best return on product advertisement; it is to generate very specific maps of consumers and sell information on how to approach pertinent customers directly, cutting out all the tedious business of billboards, commercials, and the flashing bar or promotional links on every ad-supported website that is largely a waste of money and effort. While this might sound good in moving to an advertising-free world, the real intent is to use research in cognitive science to bypass your rational mind and appeal directly to your affective systems and mechanisms of addiction, which many gaming app manufacturers are already doing in a crude, cargo-cultish fashion which is nonetheless pretty effective. When Facebook encourages you to post group pictures with yourself and your friends, it is breaking down and collating all of that information about where you are at, who you associate with, what you are doing, and so forth to generate specific predictive models of your personality. And anyone who thinks that “advertising doesn’t work on me” has not seen how much companies such as Facebook and Google are investing into marketing-based cogsci research to understand how to predict and manipulate consumers. Instagram was no doubt purchased for the platform and then enabling technologies, not for a farcical valuation that is in no way related to any future revenues, but having access to all of the information people post is just another data source that is probably worth billions of dollars to Facebook in building their consumer maps which will ultimately give them the “killer app” of predicting consumers better than anyone else. It’s just a good thing they aren’t also working on permanantly flying surveillance platforms because if they were that would be the essential plot of [_Captain America: The Winter Soldier_](https://m.youtube.com/watch?v=tmfLYkcgJD8). [Oh, wait…what?](https://www.engadget.com/2017/06/29/facebook-successfully-lands-aquila-drone/). Well, I’m sure it won’t be used to [influence signficant events](https://m.youtube.com/watch?v=b2AOCOfyHOg) or [be used to kill millions of people](https://m.youtube.com/watch?v=3ru5wM7fl7g). At least not if a genetically-engineered supersoldier, his buddy with a “bird costume”, and their former Russian assassin friend have anything to say about it. Stranger ---
**Author:** ![JohnT](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/johnt/32/15048_2.png) [@JohnT](https://boards.straightdope.com/u/JohnT)\ **Post date:** [April 2, 2018, 2:53pm UTC](https://boards.straightdope.com/t/facebook-throws-away-a-billion-dollars/618367/79 "2018-04-02T14:53:53Z")
> [@Dewey\_Finn](#): > > If you buy the assumptions and estimates made in that analysis (“We applied a multiplier of 1.9 to this figure”), sure you can assign that valuation to Instagram. Now I don’t have a finance background, so I don’t know how valid that calculation is, but it seems to me that you could make other assumptions and estimates and come up with a much lower valuation. Yeah, I’m not arguing for the article’s valuation methods, but regardless of how it is done, it’s pretty obvious that FB did NOT “throw away” a billion dollars. ---
**Author:** ![MichaelEmouse](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/michaelemouse/32/101_2.png) [@MichaelEmouse](https://boards.straightdope.com/u/MichaelEmouse)\ **Post date:** [April 2, 2018, 2:59pm UTC](https://boards.straightdope.com/t/facebook-throws-away-a-billion-dollars/618367/80 "2018-04-02T14:59:33Z")
> [@Stranger\_On\_A\_Train](#): > > While this might sound good in moving to an advertising-free world, the real intent is to use research in cognitive science to bypass your rational mind and appeal directly to your affective systems and mechanisms of addiction, which many gaming app manufacturers are already doing in a crude, cargo-cultish fashion which is nonetheless pretty effective. Aside from what’s used in Farmville et al, what are some of the techniques used to advertise while bypassing the rational mind and appealing directly to one’s affective systems and mechanisms of action? What are the non-crude ways which aren’t primarily aimed at bored middle-aged housewives, children or the elderly? [Previous page](https://boards.straightdope.com/t/facebook-throws-away-a-billion-dollars/618367.md?page=3) [Next page](https://boards.straightdope.com/t/facebook-throws-away-a-billion-dollars/618367.md?page=5)