Facebook purchase of Instagram marks shift to mobile platform

Interesting correlation between this event and the movement toward mobile platform.  How long will it take for Microsoft to fall?

Facebook’s surprise announcement that it would buy Instagram for $1 billion, less than a week after venture capitalists valued the company at half that amount, has sparked talk of inflated valuation for the photo-sharing company.

Andy Baio of Wired compares the Instagram purchase to some other prominent tech buyouts and reached the conclusion that Mark Zuckerberg got a bargain, sort of. And Jenna Wortham of the New York Times makes the case that Instagram may mark the first of a series of deals involving companies with little presence on computer desktops but plenty of mobile users.

Baio writes that young Internet companies have traditionally been valued for their growth and number of users. By those measures, Instagram beats most, even though the company has no revenue and no clear path toward making money. He argues:

If we look strictly at the acquisition cost per user, Facebook got a relative deal with the Instagram purchase, paying roughly $28 for each of Instagram’s 35 million users.

Meanwhile, the Times reports that Facebook’s big buy has other app makers seeing dollar signs, and the purchase is a giant step in the shift from desktop to mobile computing.

Wortham writes:

Smartphones are everywhere now, allowing apps like Foursquare and Path to be self-contained social worlds, existing almost entirely on mobile devices. It is a major change from just a few years ago, underscoring how the momentum in the tech world is shifting to mobile from computers.

In that context, the Instagram deal looks like something of a turning point, as even the Web giant Facebook tries to get a better grasp on a market that requires a rethinking of old rules.

“For decades, the center of computing has been the desktop, and software was modeled after the experience of using a typewriter,” said Georg Petschnigg, a former Microsoft employee who is one of the creators of Paper, a new sketchbook app for the iPad. “But technology is now more intimate and pervasive than that. We have it with us all the time, and we have to reimagine innovative new interfaces and experiences around that.”

If that is indeed the case, the Instagram deal is just the start of something very big as the world of apps comes of age.

Read more: http://www.portfolio.com/views/blogs/money-hunt/2012/04/11/facebook-instagram-purchase-has-some-seeing-bubble-while-others-see-next-big-thing#ixzz1rpDreuHB

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About maricopasbdc
Director of Maricopa Community Colleges SBDC, serving Maricopa County small businesses with free technical assistance, and seminars, training and other services.

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