I had a very lengthy conversation with a friend last week about how incredible the $500 million valuation of Instagram sounded and I was stunned to find out that Facebook bought the company for 1 billion dollars yesterday!
Instagram is an app on the iPhone and Android that allows you to take photos from the phone and transform them using filters to give them a vintage look (among other things) like this image right here.
Image Credit: nikrowell
The idea is simple, and executed very well, whether it’s worth a billion dollars or not – only Mark Zuckerberg knows!
I found several fascinating aspects about this whole story, and I think if you combine all the elements – it must be pretty unique.
1 Billion Dollars for an App
1 billion dollars is a lot of money, and I doubt that anyone could have predicted that a company with an app will sell for that much five years ago.
From what I’ve read – I can’t find any mention of revenues anywhere, and it is quite likely that Instagram has no revenues at all. Not low revenues, but no revenues, as in zero revenues. That a company can sell for a billion dollars without any revenues is mind boggling!
30 Million Users
Instagram has more than 30 million users, and they just recently came to Android, so that’s a very big base just riding on the iPhone for a long time.
Sign of Bubble or Brilliant Acquisition?
These huge numbers obviously make you wonder whether this is a sign of a bubble in the tech world, and if you call this a bubble, someone will be quick to remind you that Google paid $1.6 billion for YouTube in 2006 which sounded ridiculously high but turned out right in the end. I would tend to think that Mark Zuckerberg is smarter than all the analysts combined who are calling it a bubble.
12 or 13 Employees
This one is truly a wow – the whole company has just 12 or 13 employees in total! As has been repeated endlessly, those are some very valuable employees!
18 Month Old
Instagram is just 18 months old, and this is probably a record where such a young company has been valued for so much.
I’m wowed every time I think of this and I got plenty of new reactions every time I mentioned this to someone yesterday. One friend dusted off his iPhone development book and decided to give it another shot, a cousin complained that VCs don’t want to invest in big projects that solve real world problems, another friend with a young child resolved to raise his kid in the US because that’s where all the opportunities are, and another one lamented the fact that all this money doesn’t create large scale employment.
Whatever your view is – you have to agree we live in very interesting times.
Two great links about this story: