Facebook acquires Instagram • Hacker News Board

Re: Facebook acquires Instagram

#351

Post by nikcub » Tue, Apr 10, 2012, 5:53 AM UTC

sendos wrote: post #349

homosaur wrote: post #86

Earlier quoted context omitted.

YouTube is a content paradise though. There's tons of value there and you can sell ads against it or even charge for premium services. Where's the money in Instagram? The content is practically worthless and their only real value is in their userbase. Even though I use the Instagram client, most of the time I see photos, they come through Twitter. So that also reinforces for me that any value is in the users and not…

> I'm more convinced that we're in a 2nd bubble now more than ever. I agree. So far I've mostly dismissed talk of "the next bubble", but this pretty much solidifies it. Of course no one knows when the bubble will burst, so I guess investors are making as much money as they can before it inevitably does burst. It's a classic case of the "greater fool theory" http://en.wikipedia.org/wiki/Greater_fool_theory

If this acquisition goes bad, Facebook goes from being worth 100 billion dollars to being worth 99 billion dollars. People don't lose their savings or retirement accounts.

To me this just confirms that people who talk about bubbles now weren't here for the last real tech bubble.

Re: Facebook acquires Instagram

#352

Post by milkshakes » Tue, Apr 10, 2012, 5:55 AM UTC

jimmyvanhalen wrote: post #149

larrys wrote: post #121

Earlier quoted context omitted.

"Where's the money in Instagram?" Preventing Instagram from developing into something that has a negative effect on Facebook. It's a "keep your enemies closer" move.

and keeping Instagram away from Google. it's a good move.

more like keeping instagram away from twitter

Re: Facebook acquires Instagram

#353

Post by sendos » Tue, Apr 10, 2012, 6:15 AM UTC

nikcub wrote: post #351

sendos wrote: post #349

Earlier quoted context omitted.

> I'm more convinced that we're in a 2nd bubble now more than ever. I agree. So far I've mostly dismissed talk of "the next bubble", but this pretty much solidifies it. Of course no one knows when the bubble will burst, so I guess investors are making as much money as they can before it inevitably does burst. It's a classic case of the "greater fool theory" http://en.wikipedia.org/wiki/Greater_fool_theory

If this acquisition goes bad, Facebook goes from being worth 100 billion dollars to being worth 99 billion dollars. People don't lose their savings or retirement accounts. To me this just confirms that people who talk about bubbles now weren't here for the last real tech bubble.

What I was referring to with the greater fool theory is that the investors who put in ~$50 million, for a valuation of ~$500 million thought they'd find a greater fool to sell the company to, to make money off of (since I don't think Instagram could actually earn that money from its userbase), and that greater fool turned out to be Facebook.

In turn, Facebook, implicitly assumes that the greater fool from whom they will make money from this deal is the public who will buy shares when Facebook goes IPO. Because with $1 billion in profits for 2011, if the market values them at $100 billion, that will be a P/E ratio of 100. Even if they double their profit in 2012, their P/E ratio will still be 50, which is astronomical.

When people put huge money into things that have low value from a business fundamentals point of view, just because they think they can sell later on to someone else to make a huge profit, I think that's the very definition of a bubble.

Re: Facebook acquires Instagram

#354

Post by nikcub » Tue, Apr 10, 2012, 6:19 AM UTC

sendos wrote: post #353

nikcub wrote: post #351

Earlier quoted context omitted.

If this acquisition goes bad, Facebook goes from being worth 100 billion dollars to being worth 99 billion dollars. People don't lose their savings or retirement accounts. To me this just confirms that people who talk about bubbles now weren't here for the last real tech bubble.

What I was referring to with the greater fool theory is that the investors who put in ~$50 million, for a valuation of ~$500 million thought they'd find a greater fool to sell the company to, to make money off of (since I don't think Instagram could actually earn that money from its userbase), and that greater fool turned out to be Facebook. In turn, Facebook, implicitly assumes that the greater fool from whom they w…

What you call greater fool is just who has more value for Instagram. Instragram is worth more to Facebook than it is to Sequoia because Sequoia don't run a social network with hundreds of millions of users and aren't trying to stop Google from killing their business.

If I buy a bathtub from a bathtub warehouse at a 50% markup am I the 'greater fool' or do I just like hot baths?

> Because with $1 billion in profits for 2011, if the market values them at $100 billion, that will be a P/E ratio of 100. Even if they double their profit in 2012, their P/E ratio will still be 50, which is astronomical.

And then if it doubles again it becomes 25, and then it becomes 12, and then it becomes 6. only 4 years away to Facebook being a blue chip stock - so all that the 100 PE ratio is telling you is that they do believe that revenue and income will grow pretty quickly over the next few years.

The last bubble got messy because public markets were being used as what private equity does today. The public was shouldering the risk profile of a big VC firm that filled in all the shitty deals.

Re: Facebook acquires Instagram

#355

Post by mikeleeorg » Tue, Apr 10, 2012, 6:52 AM UTC

gammarator wrote: post #247

kooshball wrote: post #174

Earlier quoted context omitted.

Like everyone else already said, VCs can't reinvest so they dont really want 2x returns. Anyways, there's a excellent blog post that explains this very clearly. It is written for founders to understand the VC's perspective when investing. Does anyone know what I"m talking about?

http://www.danshapiro.com/blog/2010/08/vc-insanity-economics...

Great article! Also related: Brad Feld's book "Venture Deals" goes into detail on a lot of what Dan Shapiro mentions in this article.

Re: Facebook acquires Instagram

#356

Post by nextparadigms » Tue, Apr 10, 2012, 7:18 AM UTC

larrys wrote: post #121

homosaur wrote: post #86

Earlier quoted context omitted.

YouTube is a content paradise though. There's tons of value there and you can sell ads against it or even charge for premium services. Where's the money in Instagram? The content is practically worthless and their only real value is in their userbase. Even though I use the Instagram client, most of the time I see photos, they come through Twitter. So that also reinforces for me that any value is in the users and not…

"Where's the money in Instagram?" Preventing Instagram from developing into something that has a negative effect on Facebook. It's a "keep your enemies closer" move.

That's exactly what this was. That's why he bought them a day after they closed a $50 million investment Zuckerberg freaked out about Instagram's plans to become much bigger, especially now that they just launched on Android, too.

Re: Facebook acquires Instagram

#357

Post by coenhyde » Tue, Apr 10, 2012, 7:49 AM UTC

I believe this is a bit of a pony show. Facebook will have its IPO soon with an expected valuation of $100billion. A move by Facebook to buy Instagram for $1 billion works in Facebook's favor by positioning public opinion in the following ways:

1. If Facebook has $1 billion to spend then they must be making a lot of money.

2. If Instagram is worth $1billion then surely Facebook is worth $100 billion.

Re: Facebook acquires Instagram

#358

Post by tucson » Tue, Apr 10, 2012, 8:14 AM UTC

Does anyone have an estimate of Instagram current yearly profit (or loss)? (sorry for the basic question, I do not know much about their service)

Re: Facebook acquires Instagram

#359

Post by regularjack » Tue, Apr 10, 2012, 8:52 AM UTC

nQuo wrote: post #204

While a bit harsh considering Instagram's success, I completely agree with this quote from Steve Jobs on startups: http://instagr.am/p/JNVJIwBElP/

So Steve Jobs hated entrepeneurs who who were just looking for someone to buy they startup. Following that line of reasoning, he most have loved it when Dropbox refused to sell to Apple.

Re: Facebook acquires Instagram

#360

Post by Tichy » Tue, Apr 10, 2012, 9:08 AM UTC

achompas wrote: post #181

georgespencer wrote: post #90

Earlier quoted context omitted.

> This is very reminiscent of Google/YouTube circa 2006. In that it was a startup acquired by a big company? Yep. > When Google bought YT it was a small team of people and a pretty nascent product that people really loved, and the usage numbers were out of control. Like most startup acquisitions, the team size is relatively small and there is significant traction in the market with headroom to mature their footprint.…

Instagram is a photo service in a sea of other photo services. You're mischaracterizing Instagram. It's not "a photo service," it's the photo service. 30M iOS users plus 1M new Android users in 12 hours. [0] Instagram is the main mobile photo app. With this purchase, Facebook strengthens their mobile position the way Google strengthened their content position with YT. The acquisitions are very similar. (edited for a…

Does the 1m in one hour really mean much? We've heard about the iPhone app, not it was available for Android, so we checked it out (except not everybody did, I did not). There won't be 1m new users per hour, it was just the first hour.