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Facebook acquires Instagram

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Re: Facebook acquires Instagram

#371

Post by TomGullen »

marcamillion wrote: post #333
TomGullen wrote: post #319

Earlier quoted context omitted.

Sorry if I came off crass, my point is that people throw 'stock tips' like this around without care and it's generally bad advice and you have to understand some people reading it may act on it. Someone could read what you wrote and buy stock when your actual reasoning is simply because you think the public are going to get excited and buy the Facebook stock because they use it, along with the big assumptions that a)…

You didn't come off crass...not to me anyway. I wasn't giving a stock tip. Just stating what I see as the most obvious conclusion. That being said, if I had a net worth of any significant value that wasn't illiquid, I would probably buy FB stock on IPO and hold it for a few years. I can't see why you wouldn't want to. They have not really monetized, they have 800M+ users and they are already doing $1B/profit per year…

One good reason not to is that a 100/1 PE ratio is very high if your assuming $1b profit and a $100b cap. In comparison Google has a P/E of 20, and Microsoft 11.

Those reasons you have given are basically a gamble on the assumptions that:

- Facebook can earn a lot more money (5x - 20x more)

- Facebook hasn't done it yet because they haven't figured it out

- They will figure it out within 3 years (your exit window)

It does seem like an overly simplified argument. I don't think monetising Facebook to the levels you think possible in a 3 year window is as easy as people think, and it might not actually be possible.

You're also ignoring the possibility that this gamble isn't already priced into the stock.

Re: Facebook acquires Instagram

#372

Post by Kavan »

homosaur wrote: post #86
inmygarage wrote: post #62

This is very reminiscent of Google/YouTube circa 2006. 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. They left the product mostly untouched and let it grow on its own. Though there was major criticism at the time, it is one of the best tech acquisitions of the past decade.

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…

When Goog bought YouTube it was a mess of content. There was litigation everywhere and no advertisers wanted their products associated with it.

But Google saw the potential in the usage stats. The YouTube search bar was the second most used search bar after theirs.

Similarly Facebook see the social engagement stats of Instagram being similar to their own.

Re: Facebook acquires Instagram

#373

Post by achompas »

georgespencer wrote: post #307
achompas wrote: post #181

Earlier quoted context omitted.

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…

It isn't the photo service: Facebook. Flickr. Picasa. Imageshack. Twitpic. Imgur... To name a few. Instagram doesn't have more users than Facebook. Hell, it doesn't even have more users than Flickr (51m) or Photobucket (50m). Instagram is a small part of the web photo ecosystem. It's a very peculiar play by Facebook, and not at all comparable to Google & YouTube other than the fact that Google acquired YouTube, and F…

sbarre has it right. You missed this part: "Instagram is the main mobile photo app."

Damn reading comprehension. ;)

To go a step further, consider: Flickr is available on every device (computer or phone) with an internet connection . Instagram was iOS-exclusive until a week or two ago, and yet it managed to reach sixty percent of Flickr's user base size. That's astounding.

Re: Facebook acquires Instagram

#374

Post by achompas »

waterlesscloud wrote: post #228
achompas wrote: post #181

Earlier quoted context omitted.

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…

I suspect the main photo app is the default android camera, by a long long long looooooong distance.

Two serious, non-cheeky questions:

--does Android's Camera app have social sharing features?

--does it provide some kind of cloud-based sharing support?

I see the above, plus Instagram's 30M+ user base, as their main benefits.

Re: Facebook acquires Instagram

#375

Post by achompas »

Tichy wrote: post #360
achompas wrote: post #181

Earlier quoted context omitted.

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.

That statistic represents pent-up demand. It's now available on the mobile OS with the largest share of the smartphone market.

You don't expect Instagram to double its user base within a year? Maybe even more?

Re: Facebook acquires Instagram

#376

Post by tkahn6 »

achompas wrote: post #374
waterlesscloud wrote: post #228

Earlier quoted context omitted.

I suspect the main photo app is the default android camera, by a long long long looooooong distance.

Two serious, non-cheeky questions: --does Android's Camera app have social sharing features? --does it provide some kind of cloud-based sharing support? I see the above, plus Instagram's 30M+ user base, as their main benefits.

Because of Android's intent system you can share it over literally any social vector installed on the phone.

Here's a screen shot of the sharing options shared via Dropbox.

http://db.tt/w456Cv47

It's a little faded because the screen shot button combo includes the back button on my phone... not the greatest design.

Re: Facebook acquires Instagram

#377

Post by Domenic_S »

dkrich wrote: post #332
Domenic_S wrote: post #313

Earlier quoted context omitted.

> It doesn't matter if you run a hedge fund, a VC fund, or a trust fund. A 2x return is a 2x return, and anybody would take it any day. Anybody who wouldn't has no business working in finance. Just because you assign a ten-year time frame to your portfolio does not diminish the return on that investment, so the return on your $50mm is 2x, not 1.1x. This is your key misunderstanding. When the fund starts, you lock up…

Also, if every dollar has one chance to multiply and you take one tenth of the fund and immediately double it at the beginning of its lifetime, that is an outstanding outcome. Just because you can't reinvest the money in that fund does not mean it is lost, it is simply paid out to investors right away. Anybody who has taken a finance course knows the simple principle that a dollar today is worth more than a dollar to…

> Again, once you have doubled your money and gotten it back, you can invest it anywhere you like, including the same companies you may have before. But now you have twice as much money.

Again, that's exactly wrong. As far as the fund is concerned, that money's gone.

Let me help you understand with this link: http://www.danshapiro.com/blog/2010/08/vc-insanity-economics...

Pay special attention to the section entitled, "They don’t appear to be particularly interested in making large amounts of money."

Re: Facebook acquires Instagram

#378

Post by refurb »

hackerbob wrote: post #134
marcamillion wrote: post #96

Earlier quoted context omitted.

I think the mere fact that they just raised $50M @ $500M valuation is the reason that this price is so high. Those investors in that round had to at least double their money...if the price was indeed $1B, that's all they did. Just 2X. Although, the argument can be made that a 2X return in 1 - 2 months isn't bad...but then again, VC funds don't have a 2 month life, so over the long-term value (i.e. 10 years most-times…

I would like someone to sit me down, and explain the economics of why accept a buyout immediately after raising. And NOT the part of accepting $1 Billon. But why they closed a round with a buyout just around the corner.

Raising a round SETS the pre-money and post-money valuations of a company. I've known companies that have taken a measly $8M round when they are already independently profitable.

It's basically a bargaining chip. Let's look at two different scenarios:

1. Your last round of financing was two years ago and you raised $2M at a post-money valuation of $8M. Two years pass and you're hot, what is you company worth? Look at some comparables (which the acquirer will try and rip apart). Do a multiple of your revenue (which the acquirer will try and rip apart).

2. Now you're hot and you think you might be acquired (or maybe not!), you raise $5M at a $50M post-money valuation. Now when you sit down at the bargaining table, you can say "Well that VC over there thinks we're worth $50M, what do you think we're worth?"

In option 2, you've got a lot more bargaining power.

Re: Facebook acquires Instagram

#379

Post by silverbax88 »

acgourley wrote: post #140
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 doubt you, or anyone else, was saying that then youtube was purchased. It merely looked popular. It turns out what Google was buying was a chance to maintain their lead in how people were going to use their computers. Facebook is now buying a chance to maintain their lead with how people are going to use their phones.

Lots of people were saying that YouTube could be monetized, especially by Google, because Google needed content, which YouTube had, Google wanted to get into the booming video landscape and Google had massive bandwidth, which YouTube desperately needed. The only issue was how fast Google would clean up all of the copyright infringement and how it would affect YouTube.

Re: Facebook acquires Instagram

#380

Post by silverbax88 »

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.

If you have billions to (over)spend, what does it say when you are terrified of tiny competitors who have shown no ability to compete with you, no revenue model and no long term ability to monetize in place?
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