Facebook buys Instagram. Why?

Faisal Kawoosa, Head - New Initiatives

Faisal Kawoosa, Head - New Initiatives

As the news about Facebook’s acquisition of Instagram was out, analysts scrambled to the Internet with their commentaries and opinions about the acquisition. Definitely, it seems unusual why the No. 1 social networking site has acquired a photo sharing app provider for US$ 1 billion, which will not fetch any revenues, is just two years old and highly unlikely will result in increase in Facebook’s reach and membership.

From all the commentaries from reputed technology analysts and writers, I can make out only two reasons:

– Facebook has dissolved a potential competitor;
– In the process, Facebook has added another natural online brand making it socially ‘complete’.

But, I have a different point to make. While the above reasons are valid, but these do not appear to be compelling enough for Facebook to shell out US$ 1 billion for Instagram. There has to be something more. One simple reason could be that through Instagram, Facebook will now enjoy ‘couch comfort’ in the rich media mobile advertising arena. But, for that as well, its own app skills were sufficient to develop a platform at much lower value.

In my opinion, Facebook’s acquisition of Instagram is propelled by the phenomenal and remarkable growth of Pinterest. In a year’s time Pinterest now figures among the top 3 social networking sites and the type of content it is best known for is theme-based pictures and videos. With Instagram features on board, Facebook has opened a service window within the two most rapidly growing smartphone platforms – Apple and Android. And, needless to reaffirm, the future of the Internet business is going to emerge through these smart mobile devices that run on Apple iOS- and Android OS- based platforms.

The success of Pinterest provides an insight into the sharing behaviour of Internet users, where pictures account for the highest interest. So, having an app that will make sharing pictures over the Facebook network easier and richer in experience would enable Facebook to reduce the impact of Pinterest’s growth. I see this as the primary reason why Mark Zuckerberg and team shelled out such a huge sum for acquiring Instagram. Not surprisingly, will it be interesting to see if Google has its sights set on Pinterest, to bring the two major online entities on a level playing field again.