In April 2012, Facebook made huge waves throughout the technology world by acquiring rival social media network and mobile photo sharing application Instagram for a cool $1 billion in cash and stock.
This potential transaction had been floated for a couple of months before Facebook actually pulled the trigger, and documents discovered in early 2011 showed that before Facebook went out and made the acquisition they had planned on creating their very own standalone mobile photo-sharing app to rival Instagram – but kill development after they realized just how much of a head start Instagram had and how much easier it might be to simply buy them out.
In the five years since, this acquisition has proven to be one of the smartest, savviest, and soundest investments Facebook has made.
They allowed Instagram to continue to operate as a totally independent brand and standalone application while integrating Instagram and Facebook services into one another “behind the scenes”, and the amazing growth that Instagram has been able to enjoy in the past five years owes a lot to the Facebook development team which has a picture-perfect track record of this kind of exponential growth.
In the beginning, pundits thought Facebook was crazy
At the time that Facebook decided to acquire Instagram, they only had about 30 million registered users taking advantage of the platform on the IOS environment and only on the IOS environment. They hadn’t yet developed an Android application and cashed in on the world’s most popular and widely used mobile operating system just yet, and many didn’t believe that they would ever be able to create the kind of excitement and engagement that Facebook had at the moment.
We are, after all, talking about a point in time when Facebook already had more than 300 million users (and was growing faster than anyone could have ever expected). For this huge titan of industry to go out and gobble up a comparatively tiny competitor – but a serious competitor, nonetheless – for this amount of money was seen as reckless and almost unnecessary by many.
It turned out that nothing could be further from the truth.
Instagram launched an Android application almost immediately after the acquisition by Facebook in April 2012, reached 50 million registered users by the end of that week (adding more than 1 million new users in the first 24 hours of releasing the Android application) and they have been off like a shot ever since.
Sure, the $1 billion price tag in cash and stock made quite a bit of people in the technology world nervous at first. But when reports came out that both Google and Facebook had been throwing offers at Instagram for a year and a half before the deal was actually consummated it’s easy to see why the value of Instagram was driven as high as it was.
You don’t get to of the most influential technology companies on the planet involved in a bidding war over nothing, and you certainly take nothing less than the most you could possibly get for your mobile application in social media network when you’re in the position of the Instagram founders.
Yes, the $1 billion price tag was way over the last evaluation of Instagram that had been released to the general public and potential investors – but Mark Zuckerberg himself came out and told the press that Facebook had to pay a premium (at the time a HUGE premium) to win the bidding war against Google and come away with a powerful asset for growth moving forward.
And boy did this deal work out for everyone involved!
A true win-win situation in the world of social media networks and mobile applications
Instagram was founded by two individuals, Mike Krieger and Kevin Systrom, and for the overwhelming majority of the time that they ran Instagram, they kept their team ridiculously small, incredibly lean, and very focused at the task at hand.
With the acquisition of Instagram, this company has an opportunity to grow faster than they ever would have been able to on their own. A massive influx of design and engineering resources poured into Instagram almost right away, and the founders of Instagram were (and continue to be) critical resources for the company’s success.
Kevin Systrom remains the CEO of Instagram, something that industry insiders thought was a crazy move and a wreck was moved by Facebook at the time considering the fact that Mark Zuckerberg historically ran Facebook as a single entity – folding everything that they acquired into the Facebook “brand” brand and running the ship entirely on his own.
This also proved to be a smart, savvy, and strategic move made by Zuckerberg, one of many that he has continued to stun the technology industry with as he leads one of the world’s most influential and valuable companies on the planet.
The autonomy allowed Instagram to grow faster than anyone could have expected, and the resources from Facebook have made it one of the fastest-growing and most popular social media networks today.
In 2017 alone Instagram added more than 100 million users to its platform, with billions of photos and videos being shared each and every month on the platform. Hundreds of millions of people engage with one another and with content published on Instagram every single day, and it’s become a major driver of online marketing and advertising.
Of all the acquisitions that Facebook has made over the years, Instagram was one of the first “Big Fish” that Facebook was able to land (certainly one of the most expensive), but it’s also proven to be a huge part of what Facebook is trying to become moving forward.
Not only did Facebook invest in a game-changing new platform and piece of technology when they went out and purchased Instagram, but they also killed off what has quickly become one of the most popular and influential social media networks – a direct competitor that would have squeezed Facebook more than anyone could have expected or anticipated in 2012.