Summer 1 2012
Robert Morris University
An Analysis of Facebook’s Acquisition of Instagram
In a world where we have over 200 major active social networking websites (excluding dating forums) its makes perfect sense why so many are doing any and everything they can to maintain, and increase, their share of the market. It also makes perfect sense why Facebook recently paid double the market value for its acquisition of Instagram, an upstart photo-sharing social network.
In April Facebook purchased Instagram for $1 Billion stunning the business world in the process. Industry analyst are concerned that Facebook overpaid for this company considering Instagram had just closed a funding round with a group of venture capitalists that valued them at $500 Million. Many believe this type of reckless spending is similar to the behavior that fueled the last tech bubble burst.
But let’s not be so quick to judge.
The article goes on to explain that some of this purchase was paid for with shares that have been inflated by many investors’ thirst for a piece of the Facebook pie. Moreover, as the aforementioned stated there are over 200 major social networking sites on the market all looking for a way to dethrone the King so this small little start-up, Instagram, is worth way more to Facebook than anyone else.
When firms look at the pricing decision there are a lot of factors that go into making that choice and some are competition, cost, advertising, and sales promotion. Well, Instagram produces well-designed applications and ease of use has made it one of the most successful start-ups of this variety. They have over 30 million registered users and its android app was downloaded more than a million times in just 24-hours. Not only does this give Facebook more users to put advertising in front of it keeps the competition from gaining ground by purchasing Instagram themselves. This move also gives Facebook some much needed design help for their mobile...