13 ms·

Instagram is "worth" more than the New York Times

240 points by ryangilbert 15y ago

stuckk 15y ago
Instagram was worth $500 million right before the purchase. it got doubled to 1bil If nyt was gonna get bought it would get multiplied by 2 so around $1.9billion. Yeah. It makes no sense. It's like comparing apples to oranges.
EREFUNDO 15y ago
From what I've heard they are paying mostly in stock, and a lot of people think Facebook itself is overvalued. So paying $1B with overvalued stock to buy an overvalued company seems to make sense.....
DanI-S 15y ago
This whole thing has really thrown into contrast the extent to which people conflate monetary value, societal value and the abstract concept of 'merit'. A business is valuable to own if you think it may bring you more money in the future, or you think that owning it will give you an advantage over your competitors. That's it. That's the entire thing. Nobody is trying to put a value on the relative social impact of Instagram vs the New York Times. Facebook merely calculated that they'll make more money as its owner than they would otherwise. That our culture has seen to directly associate cash value with 'intrinsic' value is another issue entirely.
- _delirium 15y ago
  A business is valuable to own if you think it may bring you more money in the future, or you think that owning it will give you an advantage over your competitors. That's it. That's the entire thing. I don't think that's accurate; that assumes that 100% of businessmen make 100% of decisions purely to make more money, which I don't think is true. If you have a big pile of money, one of the things you can do with it is buy or start companies that you think will make you more money, but other things you can do include buying/starting companies you think will advance your personal goals, buying companies you'd just like to own, etc. For example, we have a lot more wealthy tech people owning space-travel companies than I think would be justified based on the economics alone. They consider them valuable to own because they want to own a space-travel company. Similarly, there is some non-zero value, beyond its projected revenues, to owning the New York Times. I would certainly pay a non-zero amount for the social power it would gain me to own the NYT, so there you have an existence proof that the value of its social position is at least a few thousand dollars. :)
  - DanI-S 15y ago
    You make a good point - there really is no way to fully disconnect the human element in these decisions. I do think there's a real difference between Jeff Bezos/etc founding a space-travel company and Facebook buying Instagram, however. Although Mark Zuckerberg is at the top, Facebook is a large organization, with likely more complex motivations than any individual.
    - randallsquared 15y ago
      To what extent does it even make sense to speak of the "motivations" of a group of people, insofar as they aren't unanimous? Has anyone done a study on whether this provides any predictive power? It seems plausible to me that a group's "motivations" are just stories about what people in the group did.
  - krschultz 15y ago
    This has been shown to be true for sports teams. People buy them for more money than the underlying business is worth because they want to be the next Mark Cuban, George Steinbrenner, etc.
  - enjo 15y ago
    It always felt to me like Teslas's entire existence is based on this:)
  - danielsoneg 15y ago
    A more accurate version is: > A business is valuable to own if you think it may bring you more value in the future […] The mistake is conflating money and value: money can be a value, but other things, like riding into space, the prestige of owning a paper, and general quality of life are also values. A decision makes economic sense if the value you gain from it exceeds the value you give up to get it, regardless of the form those values take.
- eli_gottlieb 15y ago
  That our culture has seen to directly associate cash value with 'intrinsic' value is another issue entirely. No, it's actually a very important point. Our culture bought into unbridled capitalism on the basis that it would produce a meritocratic economy in which market value approximates social ("intrinsic") value. If that is a lie, we have every grounds to reevaluate our economic model for our own good.
  - DanI-S 15y ago
    I couldn't agree more. However, that big old can of contentious worms is exactly why I called it another issue entirely :)
  - baddox 15y ago
    When has there ever been "unbridled capitalism?"
    - eli_gottlieb 15y ago
      Right now?
- lolcraft 15y ago
  The question that the article is trying to answer is: why did Facebook pay 1 billion dollars for Instagram? We can't, of course, argue that, since Facebook paid 1 billion USD for Instagram, Instagram is worth 1 billion. Simple circular argument. So, why did FB pay 1 billion dollars for Instagram? Now, the article compares the New York Times, a well established, global corporation, which reaches millions, has lots and lots of world-class talent, physical assets, and a defined business model with profits, as an alternative buy to Instagram. Which consists of 37 million users, most of them in Facebook already, and no clear business model. For roughly the same price. And it asks us to consider what choice we would make, supposing we were on FB's board of directors. That's it. No deep questions on the fetishism of commodities or the marginal social value of this transaction.
  - codesuela 15y ago
    >defined business model with profits I think a startup with no business model tops a "defined" business model with rapidly declining profits
    - Tloewald 15y ago
      No business model is better than declining profits? In other words operating at a loss is better than declining profits?
  - epo 15y ago
    For the millionth time, FB did not "pay" 1 billion, they gave Instagram an unspecified (and probably very low) amount of money and a quantity of pre-IPO stock. FB paid almost nothing, their risk is trivial, Instagram's investors however have had their bet on Instagram converted into a bet on Facebook.
    - ansgri 15y ago
      I'd consider this the definitive answer.
    - dreamdu5t 15y ago
- 3am 15y ago
  I don't think Facebook believes they'll make more money buying Instagram (I'd be will to bet that on a P&L basis the NYT will make more/lose less than Instagram over the next 5 years). I think that they believe their enterprise value will decrease less and this is a defensive acquisition. They probably saw that $100B valuation vulnerable to dropping to $75B (completely made up numbers, just for the purpose of example) if user growth or photo sharing (or some other blech social metric) dropped off in the lock-up period. Spending $1B to preserve $25B of 'value' is an easy call. Let other people say what they will about the fact that such a easy to reproduce and young startup caused them to drop $1B defensively...
endersshadow 15y ago
Something's only worth what somebody else is willing to pay for it. Try buying the NYT for $950 million one share at a time. You will actually drive the price up, since there's displayed demand. The market cap is just the sum of all of its shares multiplied by the last price the share traded at. It would take considerably more to purchase the entirety of the company. That being said, Instagram sold for an outrageous amount. But this article is rather naive in how stock markets work or how companies are valued.
- larrys 15y ago
  "It would take considerably more to purchase the entirety of the company." What you said is true. But the argument of "worth more" etc. is arbitrary and just looks good in print. Same as clearing x million users etc. So even if you had to pay 1.4 billion (a 40% premium) to buy all the shares of the NYT it still shows an interesting comparison of value.
- reitzensteinm 15y ago
  If only because every person who owns NYT stock at a $950 million market cap expects it to go up - otherwise why hold the stock?
  - ebaysucks 15y ago
    Asset allocation is about relative performance and capital preservation in real terms.
    - reitzensteinm 15y ago
      You're right about that. I didn't consider people buying and holding expecting zero real returns, vs eg T-Bills which might offer negative. But my point was that you'd be merely matching an offer that they'd already implicitly turned down because they expect a better offer later - sell their share of the company at the current market cap. That can include capital preservation, e.g. maybe you'd rather have exactly 100% of your portfolio value in real terms in 20 years than 100% now, since you believe the market will go down.
jaredmck 15y ago
The NYT has a ton of costs built into the company, and therefore into the market cap.
m__ 15y ago
You couldn't by the NYT as a whole for its market cap. Companies are almost always bought at a premium, as the sellers receive some of the value that is generated by the transaction itself (actually, there is some evidence that the sellers receive all the value generated by the transaction).
Turing_Machine 15y ago
While I haven't been following it lately, not long ago the NYT was reported to be worth approximately the market value of its real estate holdings (that is, the paper itself was essentially worth nothing). That may be shocking, but it's happening everywhere -- Newsweek was supposedly sold for $1.00 and the assumption of its debt. I certainly wouldn't be putting any money into print-based media.
- ArbitraryLimits 15y ago
  Well, remember the same thing happened with all the movie studios in the late 1980s - someone sat down and calculated that the market price to buy a studio was less than what they could get by selling all the shooting lots in Century City to a real estate developer. This was also just a few years after the studios freaked out that the VCR was going to put them out of business. There were a ton of takeovers of the studios after that, but it's not like movies aren't still around and still profitable. Of course, their revenue model has changed significantly since then. Of course, the same thing also happened to Silicon Graphics in the early 00s and they really are dead now. I'm not saying it's not a worrisome sign for print media, just that it doesn't necessarily mean they won't make it through, albeit with lots of changes.
  - dpcheng2003 15y ago
    It happens all the time today. Companies like Sears and Burger King have been taken private (through leveraged buyouts) to unlock the value of their real estate (i.e., sell them).
    - hessenwolf 15y ago
      Richard Gear's character in 'Pretty Woman' made a living out of just that; the sum of the values of the parts of some companies is more than its market value (Price to Book < 1). (Then he fell in love with a red-headed hooker and decided not to break up a ship building company, and help manage the company to build more ships instead.)
  - lanstein 15y ago
kirubakaran 15y ago
A glass of water can be worth more than the New York Times if Zuckerberg is lost in the desert and you happen to have water. It can be worth even more if Larry Page is dying of thirst at the same time and starts a bidding war.
- nir 15y ago
  It's a good metaphor for the current market, if you remove the "lost in the desert" part.
  - scarmig 15y ago
    Hmm, I'm not even sure that the "lost in the desert" part is inappropriate as the metaphor. What was it that I read about an AirBnB for dogs the other day?
    - RegEx 15y ago
      Dear god, I honestly can't tell if this is sarcastic.
      - rpeden 15y ago
        http://news.ycombinator.com/item?id=3004918 http://news.ycombinator.com/item?id=3004918
      - pault 15y ago
        As funny as it may sound, extended travel is a serious PITA when you have pets at home. Being able to leave your dog or cat with someone who has built a reputation as a good caretaker would be hugely preferable to taking them to a kennel.
        Causalien 15y ago
        It sounded so dumb at first, but after thinking about how my pet changes my travel schedule and has caused me to ask too many favors from friends. Someone please do this. It'd be awesome to be able to leave my pet with other fellow pet owners. I'd be willing to take pets in my house as well to keep my cat company.
ReadyNSet 15y ago
NY Times is/was NOT threatening facebook's reason d'ittre
- evincarofautumn 15y ago
  Raison d’être. I don’t know how threatening Instagram truly was to Facebook. Sure, they’re both social networks, but serving very different purposes. Instagram will remain running and separate from Facebook. The move is probably just the good sense to get in on a growing company that they can integrate with their platform—doubling, of course, as a defensive manoeuvre.
- vasco 15y ago
  I think you meant to say "raison d'être"
mikeryan 15y ago
In some ways I wonder if Facebook is viewing these acquisitions more as money spent in a defensive "moat" a la Google.
- maxprogram 15y ago
  I think that's exactly what they're doing -- except in this case I think Instagram was more of a direct threat to Facebook's core business than, say, YouTube was to Google's. Google was like a big castle with a moat protecting it. YouTube was just a moat -- no economic castle yet. Google bought them to add to their moat and further protect the castle. No way Instagram is worth $1bb as a standalone, going-concern -- but as a defensive play for FB it might be. All back to Clayton Christensen: modular systems disrupt integrated systems. Microsoft, Intel disrupt Apple, IBM. Instagram, Twitter, Pinterest disrupt Facebook.
dhimes 15y ago
The NYT lasted longer. Building a business that survives through generations is not to me sneered at. Yes, in these times of unthinkable market reach a new biz may get a speculative valuation (although some think it may be defensive), the NYT brand is/was classic. Frankly, it's humbling to think about.
benihana 15y ago
I didn't realize the New York Times was the yardstick that we use to measure the worth of tech startups.
- ryangilbert 15y ago
  It's not. It's just crazy to think that a web app with $0 revenue that's been around for ~2 years can be worth a newspaper that's been around for over 150 years and has won more Pulitzer Prizes than any other news group.
  - bdunbar 15y ago
    "Longevity and subjective awards are no substitute for a good valuation in your portfolio." Han Solo, capitalist.
  - Drbble 15y ago
    Why? Mother Teresa had a very small market cap. Also, NYT pays a lot in salaries every year, which generates a lot of value for stakeholders, just not for stockholders.
  - robbrown451 15y ago
    It seems crazy but it isn't really. What if NYT has a lot of debts? It could be worth negative amounts, since the new owner could be responsible for those debts. There are plenty of ways for a large company (especially an older company) to have a neutral or negative market cap, since that is based on its profit potential, not on how much economic activity it creates.
deleted 15y ago
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tybris 15y ago
At this point, Instagram's primary value is in its brand. I never used it, but heard about it so many times that I was under the impression it had been around for years. It might have 30 million uploaders, but hundreds of millions of people are aware of it. For an 18-month brand that is perhaps the most meteoric rise in history. If you consider WPP's brand value estimates (Apple $153 billion, Google $112 billion, Facebook $19 billion), the number might not be so weird.
- glimcat 15y ago
  The value of brand awareness is also inversely proportionate to how much brand awareness you already have. When you're Facebook, more brand awareness may not be the primary motivator.
- vidar 15y ago
  Also because of this deal, millions of people hear of it and start trying it out.
basseq 15y ago
I think, all things being equal, I'd rather own the NYT than Instagram. Which isn't to say that Facebook didn't make the right decision (i.e., to forego buying the NYT), but that value is relative.
- samtp 15y ago
  Would you rather own one of the most established news institutions in the modern world or a 2 year old photo sharing startup? How is this even a question?!
  - vidar 15y ago
    Ask Zuckerberg, he seems to have made up his mind.
    - wiredd 15y ago
      He should buy the New York Times too, and make their articles free to logged in Facebook users. That would bring me back to Facebook more than instagram will (nothing against instagram - it's a great app).
      - basseq 15y ago
        Ha, that was my thought experiment, too. Doesn't seem to be a fit with the current demographic of Facebook, but Facebook is trending towards a "social media conglomerate" to the point where it would almost make sense. Interesting play. (Though back to the point at hand, I doubt you could buy the NYT for $1B, value or not.)
whackberry 15y ago
I've been in the computer business all my life. I've learned something: there is no place on Earth where ridiculous amounts of money is spent on ideas that may or may not make sense like it is on tech. I've seen companies spend millions on mainframe computers used for transferring text files around, which a handful of pc-sized servers could probably do just as well. The "easy" money in the technology sector is something that should be seriously investigated IMHO. I think everyone who works with technology has seen their share of suspicious deals. The question to ask is often: who is providing the easy money, money which can be "wasted" as long as it produces a profit? Facebook ran on investor money up until a short while ago(a short while in major corporation age, what, 2 or 3 years?). I wouldn't be surprised if Apple bought Instagram. But Facebook is not even established as a blue chip, it's not a money printing machine, and it just pulls U$ 1 billion out of its pocket and buys a photoshop thingy??? I find this deal hard to understand. I think U$ 1 billion has just been efficiently moved from place A to place B and that's as much sense as I can make of it.
- Drbble 15y ago
  How is producing a profit "waste"?
- tensor 15y ago
  It's even worse than that. The $1 billion is largely in stocks from what I understand and parts of it are vested. This means that the stocks don't actually move from one place to another slowly over time. Further, this is not actually money. It's based on what people think the value of Facebook's stock is. That value can go up or it can go down. Personally, I think the current state of valuing user data so highly is insanity. I suspect that this purchase will later be used as a prime example of another bubble, but this time a marketing bubble rather than a tech bubble.
- arethuza 15y ago
  Well, I can think of one conspicuous counter example from the world of banking - the RBS acquisition of ABN Amro for £49 billion with practically no due diligence and which almost destroyed RBS (which would had caused utter chaos had it collapsed).
niccolop 15y ago
I fail to see why the title uses speech marks, Instagram is worth $1bn. It happens to be more than the NYT because that's the price the market has determined for the companies. An interesting analogy can be found here with Google's acquisition of YT in 2006: http://blogs.ft.com/tech-blog/2012/04/with-its-instagram-purchase-facebook-treads-a-familiar-path/ http://blogs.ft.com/tech-blog/2012/04/with-its-instagram-pur...
Atropos 15y ago
I always find it very hard to grasp the value of software companies intuitively. If Facebook is worth $100b right now, it is already bigger than Amazon or Siemens! Of course a huge part of the value is an x% chance bet on future growth / future ability to monetize and doesn't reflect the current status you can see - rationally I can believe the valuation is defensible but emotionally I always think "No way!"
- GFischer 15y ago
  Well, compare http://investor.google.com/financial/tables.html http://investor.google.com/financial/tables.html with http://www.siemens.com/annual/11/_pdf/siemens_ar2011_cfs.pdf http://www.siemens.com/annual/11/_pdf/siemens_ar2011_cfs.pdf and you'll see that Siemens had an EBITDA of eur 9,242 million, while Google had an EBITDA of 2.79 billion Facebook has a projected EBITDA of 2 billion or so, based on 250 million in 4th quarter earnings. So, if you applied traditional valuation methods, Siemens should be worth more than Google or Facebook. However, Siemens is more stable, while both Facebook and Google haven't tapped into more potential sources of income, and that's what investors are recognizing by valuing it that way.
victorbstan 15y ago
In money maybe. But in information value?
paulhauggis 15y ago
This purchase reminds me of the broadcast.com purchase by Yahoo.
ForrestN 15y ago
I think people are underestimating the importance of the NYT. If the NYT suddenly disappeared tomorrow, I'd argue that, at least in the near term, it would have far-reaching implications for the US as a society, as a political body, and as a culture. I think it would impact the course of global events in very real ways. The NYT, despite its market cap, is thoroughly integrated into the fabric of the US and serves a number of very important functions. If instantgram shut down tomorrow, it wouldn't matter at all. In fact, I think that if Facebook shut down tomorrow it would matter less than if the NYT did. I have no idea if the valuations are crazy, and I don't mean to be making a point about bubbles or anything else. I just think it might be a condition of contemporary capitalism that "importance" and "value" are in many cases unrelated.
- _exec 15y ago
  >>I think people are underestimating the importance of the NYT. If the NYT suddenly disappeared tomorrow, I'd argue that, at least in the near term, it would have far-reaching implications for the US as a society, as a political body, and as a culture. I think it would impact the course of global events in very real ways. The NYT, despite its market cap, is thoroughly integrated into the fabric of the US and serves a number of very important functions. Would you care to elaborate?
  - ForrestN 15y ago
    Take politics for example. The NYT, far more than any other press organization, functions to expose or amplify information about scandals, secret agendas, government mistakes and abuse. It interviews, analyzes and reports on candidates for office in ways that routinely, as in maybe twice a month, significantly impact the trajectory of a campaign and subsequently an election. Another example is Wikileaks, where the NYT played a very important role on several sides of the story. The NYT is very much responsible, especially within the US, of amplifying, editing, and creating much of the narrative around the major Wikileaks dumps it was involved with. And they aren't always a force for "good", and have done a lot to damage Assange's reputation and helped marginalize Wikileaks. I don't think everything the NYT does is great, but they are a hugely important part of many many world-scale developments. You could write similar things about its role as an arbiter and editor of culture, about its influence on the public discourse and the ideas that permeate contemporary life, on its role in business and consumer culture (Foxconn, as a recent example). It touches so many things, and reaches so many, as those in tech might call them, "influencers," that it permeates American life, directly and indirectly.
mcbaby 15y ago
The New York Times, according to a quick Wikipedia search, has a (print) circulation of <2,000,000. They also have several hundred thousand users subscribing online (this number is to be taken with a grain of salt, it's my own estimate after perusing Google). The NYT has been around since 1851. Instagram was founded two years ago, and already has 27 million users--and its Android version is not even a month old. I know owning a company is different than investing in one, but if we stripped away their names and cultural stigmas, I think most people would innvest in--and own--Instagram over the NYT.
- ArtB 15y ago
  I think the point is that it is sad that yet another social media app is worth more monetarily than The New York Times which is one of the finest new sources in existence.
  - mcbaby 15y ago
    But "worth" is such a subjective word. Instagram is only worth 1bn to Facebook, whereas the NYT's value is derived from its market cap. And being "one of the finest news sources in existence" (which I don't believe) does not necessarily denote monetary value. With that said, I'd assert that Instagram's value does not truly reflect its market value—it's only the value that Facebook saw in it. The NYT's value does reflect its true market value, as it's a publicly traded company. Again, I'd still invest in Instagram over the New York Times any day of the week.
  - gavinlynch 15y ago
    "The New York Times which is one of the finest new sources in existence." Really? I've read the times for almost a decade and just can't agree with that statement. I hardly bother anymore, unless it's to peak at Thomas Friedman or David Brook's opinion columns. I just don't find the quality of writing I'm looking for. If I want to inform myself on an issue, I'm looking to the Economist, the Atlantic or Financial Times. NYTimes is barely on the radar to me shrugs Don't get me wrong, the New York Times is a phenomenal brand, but they're just a run of the mill above-average news source IMHO.
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yuxt 15y ago
Few years ago a 2 years old startup with no revenue was acquired for almost twice what New York Times is today. Now this startup helps to bring more than $1 billion in earnings. The name of the startup is Youtube.
- vaksel 15y ago
  Youtube is a whole different kind of animal though.
  - ramblerman 15y ago
    I agree with you, but the criticism and general opinion was very similar. People didn't get it, and google was 'being silly'
guan 15y ago
“It’s hard to find a mathematics in which Instagram worth $1 billion in cash, but in pre-IPO stock, Facebook could stomach the hit.” This statement might make sense if Facebook were cash strapped, but in fact Facebook has plenty of cash. By paying in pre-IPO stock that is likely to be worth a lot more in a few months, Facebook is probably getting a bad deal compared to Instagram investors. It’s true that some people think Facebook is overvalued, but there are also analysts who believe Facebook is fairly valued (http://aswathdamodaran.blogspot.com/2012/02/ipo-of-decade-my-valuation-of-facebook.html http://aswathdamodaran.blogspot.com/2012/02/ipo-of-decade-my...), and few are arguing it’s as overvalued as, say, Groupon was at IPO.
Jabbles 15y ago
Is there a 1% chance that the enormous rate of growth of Instagram would have continued for a few more years to produce a social network the size (and profitability) of Facebook? If so, that's a justification for Instagram being worth roughly 1% of Facebook.
patrickgzill 15y ago
The NYT may well be worth less than its current market cap, given that it has a very high overhead in terms of its operating costs, has to manage a lot of people, and is losing money - see their own reporting at http://www.nytimes.com/2012/02/03/business/media/quarterly-profit-falls-12-2-at-times-co.html http://www.nytimes.com/2012/02/03/business/media/quarterly-p... The NYT is shrinking, Instagram is growing - that too, matters.
EricDeb 15y ago
Like all celebrities, Facebook is a bit insecure and likely overly paranoid about losing its choke hold on social/sharing. Obviously this was only a factor, but probably is the factor that pushed Instagram's value over the top.
jashkenas 15y ago
As someone who works for the Times, it's nice to see the general sentiment of value from folks in this thread. There are a bunch of folks saying that comparing acquisition price to market cap is apples vs. oranges, which may be true ... but how about market cap to market cap? By that yardstick, Yelp.com is worth 1.5 times The New York Times. http://www.google.com/finance?q=NYSE:YELP http://www.google.com/finance?q=NYSE:YELP
tazzy531 15y ago
Should be: the future value of Instagram is greater than future value of nyt.
shootthemoon 15y ago
I think that it is easy to confuse worth in terms of cultural value, historical value, and monetary value. Is Instagram worth more monetarily? Yes, in the realm of advertising, Instagrams user base is right smack in the center of the target demographic sought by many advertisers; the 12-30 crowds. Historically and culturally speaking, I believe that the NYT offers far greater value. But, who wants to spend $1B on historical value?
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voidfiles 15y ago
I think it's also safe to say that Facebook, and Instagram are worth more because they're more personal. In terms of the greater good, The New York Times probably serves a greater purpose, and it also costs more to run. In terms of the individual, Facebook is worth more to them. It seems like these social products deliver more value to individuals, and so going forward are going to be worth more then newspapers.
dpcheng2003 15y ago
People dismiss this company for being just a photo-sharing site and then one day, poof, it's worth $1bn. Pretty much just described Facebook too. http://venturebeat.com/2010/07/21/fred-wilson/ http://venturebeat.com/2010/07/21/fred-wilson/ Instagram took arguably the most important part of the mobile social process—taking photos—and made it cooler than everything else, including what Facebook, was offering. As for the NYT v. Instagram argument, I think we can all agree the NYT's social value may outstrip its economic value. The outrage about the decline of the NYT should've started when Craigslist started offering free listings.
wave 15y ago
Facebook know exactly how much Instagram is worth. They don't even have to ask the data from Instagram. They can just look at their own Facebook data to see how many of their users use the service. Also, every photo you see on the web has a Facebook Like button. They have all the data they need to make the decision. Looking at their data, Facebook feared that not acquiring Instagram is a risk to their business, so they rather lose $1 Billion than giving advantage to other social networking sites such as Google+. Mark Elliot Zuckerberg is determined to stay on top.
SandersAK 15y ago
apples, meet oranges!
gyardley 15y ago
Acquisition price reflects the value to the acquirer; market cap reflects the value to the shareholders. Neither reflects value to society - something completely unrelated.
kwamenum86 15y ago
Putting the word "worth" in quotes kind of makes this article "worth" nothing, doesn't it?
niels_olson 15y ago
The NYT needs to admit their mistake and heed Steve Jobs's advice from the grave: lower the subscription price. $5-10 a month? We'd all pay. $40 a month: are they crazy?!
og1 15y ago
I guess it is also worth slightly less than 800 AOL patents. I think it is just how much someone will pay for it vs "worth". How can you really arrive at an estimate that NY Times ~ Instagram ~ 800 Patents anyway?
dunk010 15y ago
Here's the thing: it's not real money. It was a part cash and part shares deal, and the facebook valuation is fantasy till they float. So what they were really arguing here is a) how much cash they could get out now and b) how much instagram is worth as a proportion of facebook.
hristov 15y ago
What this analysis fails to point out is that the NYT company has about 2.3 Billion dollars of liabilities. Instagram is presumably debt free. Thus if you look purely at the market value of the business, instagram is still worth less than one third of the NYT. People complaining about the troubles of newspapers tend to forget how in the nineties, when newspapers were doing very well, they all got greedy and loaded themselves with large amounts of debt in order to go on monopoly seeking acquisition sprees.
rayiner 15y ago
I wouldn't invest in an old-media newspaper company in 2012...
fierarul 15y ago
Might be a coincidence, but I think the title is suggested by this HN post: http://news.ycombinator.com/item?id=3820850 http://news.ycombinator.com/item?id=3820850 >the NY Times is valued at 900 million. >just sayin' I was a bit surprised reading that post and even more a few hours later when I read the title.
zallarak 15y ago
This is a ridiculously misleading post, cannot believe its on the front page. The NYT is worth approximately $1.5B. It's market cap is $928MM, its debt is $773MM and cash is $175MM. Enterprise value = Debt + Equity - Cash, so that puts it around $1.5B.
- turar 15y ago
  Market cap is a commonly used method to measure the company's worth, as determined by the market. If everyone agreed that NYT was in fact worth 1.5B, its market cap would have been 1.5B. Also, there are many companies that have negative EV based on that formula, yet are still functioning businesses.
  - damoncali 15y ago
    That is totally incorrect. Market cap is the value of the equity, not the business.
    - turar 15y ago
      Totally incorrect? The value of the equity is simply "assets minus liabilities", a.k.a book value, which can be completely different from the market cap in dollar terms. And thanks for the downvote.
      - damoncali 15y ago
        Yes - totally incorrect. You are mixing up multiple concepts here. Book value is just that - what the accountants come up with for the books. The value of debt is how much the debt is worth. The value of the equity is how much the equity is worth (that is, the market cap). None of those are equivalent to the value of the company. Suppose I pay $60k in cash and take out a $240k mortgage to buy a house. The $60k is equity (market cap), and the $240k is debt. The value of the home is $300k. It works the same way with companies.
        turar 15y ago
fleitz 15y ago
The revenue potential of the NYT is well known and has been steadily declining, the potential for the Instagram is largely unknown but it is known that the internet space is rapidly expanding. Instagram like the NYT is a business and as such is usually bought or sold with regard to it's potential to generate income, rather than it's social impact. The liabilities for Instagram are 12 people's salary and a few servers, the liabilities involved in the NYT are simply astounding, reporters salaries, print shop salaries, marketing salaries, buildings, etc. Instagram has people pay for the privilege of giving them content where as the NYT must pay others for their content, that difference alone is very important.
Shenglong 15y ago
In reality, the NYT would probably sell for much more, based on goodwill.
danbmil99 15y ago
The quotes can come off once FB goes public.
jakeonthemove 15y ago
News Corp acquired MySpace for $580 million - we all know what happened later...

240 points by ryangilbert 15y ago

Instagram was worth $500 million right before the purchase. it got doubled to 1bil If nyt was gonna get bought it would get multiplied by 2 so around $1.9billion. Yeah. It makes no sense. It's like comparing apples to oranges.

EREFUNDO 15y ago

From what I've heard they are paying mostly in stock, and a lot of people think Facebook itself is overvalued. So paying $1B with overvalued stock to buy an overvalued company seems to make sense.....

DanI-S 15y ago

This whole thing has really thrown into contrast the extent to which people conflate monetary value, societal value and the abstract concept of 'merit'. A business is valuable to own if you think it may bring you more money in the future, or you think that owning it will give you an advantage over your competitors. That's it. That's the entire thing. Nobody is trying to put a value on the relative social impact of Instagram vs the New York Times. Facebook merely calculated that they'll make more money as its owner than they would otherwise. That our culture has seen to directly associate cash value with 'intrinsic' value is another issue entirely.

_delirium 15y ago
A business is valuable to own if you think it may bring you more money in the future, or you think that owning it will give you an advantage over your competitors. That's it. That's the entire thing. I don't think that's accurate; that assumes that 100% of businessmen make 100% of decisions purely to make more money, which I don't think is true. If you have a big pile of money, one of the things you can do with it is buy or start companies that you think will make you more money, but other things you can do include buying/starting companies you think will advance your personal goals, buying companies you'd just like to own, etc. For example, we have a lot more wealthy tech people owning space-travel companies than I think would be justified based on the economics alone. They consider them valuable to own because they want to own a space-travel company. Similarly, there is some non-zero value, beyond its projected revenues, to owning the New York Times. I would certainly pay a non-zero amount for the social power it would gain me to own the NYT, so there you have an existence proof that the value of its social position is at least a few thousand dollars. :)
- DanI-S 15y ago
  You make a good point - there really is no way to fully disconnect the human element in these decisions. I do think there's a real difference between Jeff Bezos/etc founding a space-travel company and Facebook buying Instagram, however. Although Mark Zuckerberg is at the top, Facebook is a large organization, with likely more complex motivations than any individual.
  - randallsquared 15y ago
    To what extent does it even make sense to speak of the "motivations" of a group of people, insofar as they aren't unanimous? Has anyone done a study on whether this provides any predictive power? It seems plausible to me that a group's "motivations" are just stories about what people in the group did.
- krschultz 15y ago
  This has been shown to be true for sports teams. People buy them for more money than the underlying business is worth because they want to be the next Mark Cuban, George Steinbrenner, etc.
- enjo 15y ago
  It always felt to me like Teslas's entire existence is based on this:)
- danielsoneg 15y ago
  A more accurate version is: > A business is valuable to own if you think it may bring you more value in the future […] The mistake is conflating money and value: money can be a value, but other things, like riding into space, the prestige of owning a paper, and general quality of life are also values. A decision makes economic sense if the value you gain from it exceeds the value you give up to get it, regardless of the form those values take.
eli_gottlieb 15y ago
That our culture has seen to directly associate cash value with 'intrinsic' value is another issue entirely. No, it's actually a very important point. Our culture bought into unbridled capitalism on the basis that it would produce a meritocratic economy in which market value approximates social ("intrinsic") value. If that is a lie, we have every grounds to reevaluate our economic model for our own good.
- DanI-S 15y ago
  I couldn't agree more. However, that big old can of contentious worms is exactly why I called it another issue entirely :)
- baddox 15y ago
  When has there ever been "unbridled capitalism?"
  - eli_gottlieb 15y ago
    Right now?
lolcraft 15y ago
The question that the article is trying to answer is: why did Facebook pay 1 billion dollars for Instagram? We can't, of course, argue that, since Facebook paid 1 billion USD for Instagram, Instagram is worth 1 billion. Simple circular argument. So, why did FB pay 1 billion dollars for Instagram? Now, the article compares the New York Times, a well established, global corporation, which reaches millions, has lots and lots of world-class talent, physical assets, and a defined business model with profits, as an alternative buy to Instagram. Which consists of 37 million users, most of them in Facebook already, and no clear business model. For roughly the same price. And it asks us to consider what choice we would make, supposing we were on FB's board of directors. That's it. No deep questions on the fetishism of commodities or the marginal social value of this transaction.
- codesuela 15y ago
  >defined business model with profits I think a startup with no business model tops a "defined" business model with rapidly declining profits
  - Tloewald 15y ago
    No business model is better than declining profits? In other words operating at a loss is better than declining profits?
- epo 15y ago
  For the millionth time, FB did not "pay" 1 billion, they gave Instagram an unspecified (and probably very low) amount of money and a quantity of pre-IPO stock. FB paid almost nothing, their risk is trivial, Instagram's investors however have had their bet on Instagram converted into a bet on Facebook.
  - ansgri 15y ago
    I'd consider this the definitive answer.
  - dreamdu5t 15y ago
3am 15y ago
I don't think Facebook believes they'll make more money buying Instagram (I'd be will to bet that on a P&L basis the NYT will make more/lose less than Instagram over the next 5 years). I think that they believe their enterprise value will decrease less and this is a defensive acquisition. They probably saw that $100B valuation vulnerable to dropping to $75B (completely made up numbers, just for the purpose of example) if user growth or photo sharing (or some other blech social metric) dropped off in the lock-up period. Spending $1B to preserve $25B of 'value' is an easy call. Let other people say what they will about the fact that such a easy to reproduce and young startup caused them to drop $1B defensively...

endersshadow 15y ago

Something's only worth what somebody else is willing to pay for it. Try buying the NYT for $950 million one share at a time. You will actually drive the price up, since there's displayed demand. The market cap is just the sum of all of its shares multiplied by the last price the share traded at. It would take considerably more to purchase the entirety of the company. That being said, Instagram sold for an outrageous amount. But this article is rather naive in how stock markets work or how companies are valued.

larrys 15y ago
"It would take considerably more to purchase the entirety of the company." What you said is true. But the argument of "worth more" etc. is arbitrary and just looks good in print. Same as clearing x million users etc. So even if you had to pay 1.4 billion (a 40% premium) to buy all the shares of the NYT it still shows an interesting comparison of value.
reitzensteinm 15y ago
If only because every person who owns NYT stock at a $950 million market cap expects it to go up - otherwise why hold the stock?
- ebaysucks 15y ago
  Asset allocation is about relative performance and capital preservation in real terms.
  - reitzensteinm 15y ago
    You're right about that. I didn't consider people buying and holding expecting zero real returns, vs eg T-Bills which might offer negative. But my point was that you'd be merely matching an offer that they'd already implicitly turned down because they expect a better offer later - sell their share of the company at the current market cap. That can include capital preservation, e.g. maybe you'd rather have exactly 100% of your portfolio value in real terms in 20 years than 100% now, since you believe the market will go down.

jaredmck 15y ago

The NYT has a ton of costs built into the company, and therefore into the market cap.

m__ 15y ago

You couldn't by the NYT as a whole for its market cap. Companies are almost always bought at a premium, as the sellers receive some of the value that is generated by the transaction itself (actually, there is some evidence that the sellers receive all the value generated by the transaction).

Turing_Machine 15y ago

While I haven't been following it lately, not long ago the NYT was reported to be worth approximately the market value of its real estate holdings (that is, the paper itself was essentially worth nothing). That may be shocking, but it's happening everywhere -- Newsweek was supposedly sold for $1.00 and the assumption of its debt. I certainly wouldn't be putting any money into print-based media.

ArbitraryLimits 15y ago
Well, remember the same thing happened with all the movie studios in the late 1980s - someone sat down and calculated that the market price to buy a studio was less than what they could get by selling all the shooting lots in Century City to a real estate developer. This was also just a few years after the studios freaked out that the VCR was going to put them out of business. There were a ton of takeovers of the studios after that, but it's not like movies aren't still around and still profitable. Of course, their revenue model has changed significantly since then. Of course, the same thing also happened to Silicon Graphics in the early 00s and they really are dead now. I'm not saying it's not a worrisome sign for print media, just that it doesn't necessarily mean they won't make it through, albeit with lots of changes.
- dpcheng2003 15y ago
  It happens all the time today. Companies like Sears and Burger King have been taken private (through leveraged buyouts) to unlock the value of their real estate (i.e., sell them).
  - hessenwolf 15y ago
    Richard Gear's character in 'Pretty Woman' made a living out of just that; the sum of the values of the parts of some companies is more than its market value (Price to Book < 1). (Then he fell in love with a red-headed hooker and decided not to break up a ship building company, and help manage the company to build more ships instead.)
- lanstein 15y ago

kirubakaran 15y ago

A glass of water can be worth more than the New York Times if Zuckerberg is lost in the desert and you happen to have water. It can be worth even more if Larry Page is dying of thirst at the same time and starts a bidding war.

nir 15y ago
It's a good metaphor for the current market, if you remove the "lost in the desert" part.
- scarmig 15y ago
  Hmm, I'm not even sure that the "lost in the desert" part is inappropriate as the metaphor. What was it that I read about an AirBnB for dogs the other day?
  - RegEx 15y ago
    Dear god, I honestly can't tell if this is sarcastic.
    - rpeden 15y ago
      http://news.ycombinator.com/item?id=3004918 http://news.ycombinator.com/item?id=3004918
    - pault 15y ago
      As funny as it may sound, extended travel is a serious PITA when you have pets at home. Being able to leave your dog or cat with someone who has built a reputation as a good caretaker would be hugely preferable to taking them to a kennel.
      - Causalien 15y ago
        It sounded so dumb at first, but after thinking about how my pet changes my travel schedule and has caused me to ask too many favors from friends. Someone please do this. It'd be awesome to be able to leave my pet with other fellow pet owners. I'd be willing to take pets in my house as well to keep my cat company.

ReadyNSet 15y ago

NY Times is/was NOT threatening facebook's reason d'ittre

evincarofautumn 15y ago
Raison d’être. I don’t know how threatening Instagram truly was to Facebook. Sure, they’re both social networks, but serving very different purposes. Instagram will remain running and separate from Facebook. The move is probably just the good sense to get in on a growing company that they can integrate with their platform—doubling, of course, as a defensive manoeuvre.
vasco 15y ago
I think you meant to say "raison d'être"

mikeryan 15y ago

In some ways I wonder if Facebook is viewing these acquisitions more as money spent in a defensive "moat" a la Google.

maxprogram 15y ago
I think that's exactly what they're doing -- except in this case I think Instagram was more of a direct threat to Facebook's core business than, say, YouTube was to Google's. Google was like a big castle with a moat protecting it. YouTube was just a moat -- no economic castle yet. Google bought them to add to their moat and further protect the castle. No way Instagram is worth $1bb as a standalone, going-concern -- but as a defensive play for FB it might be. All back to Clayton Christensen: modular systems disrupt integrated systems. Microsoft, Intel disrupt Apple, IBM. Instagram, Twitter, Pinterest disrupt Facebook.

dhimes 15y ago

The NYT lasted longer. Building a business that survives through generations is not to me sneered at. Yes, in these times of unthinkable market reach a new biz may get a speculative valuation (although some think it may be defensive), the NYT brand is/was classic. Frankly, it's humbling to think about.

benihana 15y ago

I didn't realize the New York Times was the yardstick that we use to measure the worth of tech startups.

ryangilbert 15y ago
It's not. It's just crazy to think that a web app with $0 revenue that's been around for ~2 years can be worth a newspaper that's been around for over 150 years and has won more Pulitzer Prizes than any other news group.
- bdunbar 15y ago
  "Longevity and subjective awards are no substitute for a good valuation in your portfolio." Han Solo, capitalist.
- Drbble 15y ago
  Why? Mother Teresa had a very small market cap. Also, NYT pays a lot in salaries every year, which generates a lot of value for stakeholders, just not for stockholders.
- robbrown451 15y ago
  It seems crazy but it isn't really. What if NYT has a lot of debts? It could be worth negative amounts, since the new owner could be responsible for those debts. There are plenty of ways for a large company (especially an older company) to have a neutral or negative market cap, since that is based on its profit potential, not on how much economic activity it creates.

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tybris 15y ago

At this point, Instagram's primary value is in its brand. I never used it, but heard about it so many times that I was under the impression it had been around for years. It might have 30 million uploaders, but hundreds of millions of people are aware of it. For an 18-month brand that is perhaps the most meteoric rise in history. If you consider WPP's brand value estimates (Apple $153 billion, Google $112 billion, Facebook $19 billion), the number might not be so weird.

glimcat 15y ago
The value of brand awareness is also inversely proportionate to how much brand awareness you already have. When you're Facebook, more brand awareness may not be the primary motivator.
vidar 15y ago
Also because of this deal, millions of people hear of it and start trying it out.

basseq 15y ago

I think, all things being equal, I'd rather own the NYT than Instagram. Which isn't to say that Facebook didn't make the right decision (i.e., to forego buying the NYT), but that value is relative.

samtp 15y ago
Would you rather own one of the most established news institutions in the modern world or a 2 year old photo sharing startup? How is this even a question?!
- vidar 15y ago
  Ask Zuckerberg, he seems to have made up his mind.
  - wiredd 15y ago
    He should buy the New York Times too, and make their articles free to logged in Facebook users. That would bring me back to Facebook more than instagram will (nothing against instagram - it's a great app).
    - basseq 15y ago
      Ha, that was my thought experiment, too. Doesn't seem to be a fit with the current demographic of Facebook, but Facebook is trending towards a "social media conglomerate" to the point where it would almost make sense. Interesting play. (Though back to the point at hand, I doubt you could buy the NYT for $1B, value or not.)

whackberry 15y ago

I've been in the computer business all my life. I've learned something: there is no place on Earth where ridiculous amounts of money is spent on ideas that may or may not make sense like it is on tech. I've seen companies spend millions on mainframe computers used for transferring text files around, which a handful of pc-sized servers could probably do just as well. The "easy" money in the technology sector is something that should be seriously investigated IMHO. I think everyone who works with technology has seen their share of suspicious deals. The question to ask is often: who is providing the easy money, money which can be "wasted" as long as it produces a profit? Facebook ran on investor money up until a short while ago(a short while in major corporation age, what, 2 or 3 years?). I wouldn't be surprised if Apple bought Instagram. But Facebook is not even established as a blue chip, it's not a money printing machine, and it just pulls U$ 1 billion out of its pocket and buys a photoshop thingy??? I find this deal hard to understand. I think U$ 1 billion has just been efficiently moved from place A to place B and that's as much sense as I can make of it.

Drbble 15y ago
How is producing a profit "waste"?
tensor 15y ago
It's even worse than that. The $1 billion is largely in stocks from what I understand and parts of it are vested. This means that the stocks don't actually move from one place to another slowly over time. Further, this is not actually money. It's based on what people think the value of Facebook's stock is. That value can go up or it can go down. Personally, I think the current state of valuing user data so highly is insanity. I suspect that this purchase will later be used as a prime example of another bubble, but this time a marketing bubble rather than a tech bubble.
arethuza 15y ago
Well, I can think of one conspicuous counter example from the world of banking - the RBS acquisition of ABN Amro for £49 billion with practically no due diligence and which almost destroyed RBS (which would had caused utter chaos had it collapsed).

niccolop 15y ago

I fail to see why the title uses speech marks, Instagram is worth $1bn. It happens to be more than the NYT because that's the price the market has determined for the companies. An interesting analogy can be found here with Google's acquisition of YT in 2006: http://blogs.ft.com/tech-blog/2012/04/with-its-instagram-purchase-facebook-treads-a-familiar-path/ http://blogs.ft.com/tech-blog/2012/04/with-its-instagram-pur...

Atropos 15y ago

I always find it very hard to grasp the value of software companies intuitively. If Facebook is worth $100b right now, it is already bigger than Amazon or Siemens! Of course a huge part of the value is an x% chance bet on future growth / future ability to monetize and doesn't reflect the current status you can see - rationally I can believe the valuation is defensible but emotionally I always think "No way!"

GFischer 15y ago
Well, compare http://investor.google.com/financial/tables.html http://investor.google.com/financial/tables.html with http://www.siemens.com/annual/11/_pdf/siemens_ar2011_cfs.pdf http://www.siemens.com/annual/11/_pdf/siemens_ar2011_cfs.pdf and you'll see that Siemens had an EBITDA of eur 9,242 million, while Google had an EBITDA of 2.79 billion Facebook has a projected EBITDA of 2 billion or so, based on 250 million in 4th quarter earnings. So, if you applied traditional valuation methods, Siemens should be worth more than Google or Facebook. However, Siemens is more stable, while both Facebook and Google haven't tapped into more potential sources of income, and that's what investors are recognizing by valuing it that way.

victorbstan 15y ago

In money maybe. But in information value?

paulhauggis 15y ago

This purchase reminds me of the broadcast.com purchase by Yahoo.

ForrestN 15y ago

I think people are underestimating the importance of the NYT. If the NYT suddenly disappeared tomorrow, I'd argue that, at least in the near term, it would have far-reaching implications for the US as a society, as a political body, and as a culture. I think it would impact the course of global events in very real ways. The NYT, despite its market cap, is thoroughly integrated into the fabric of the US and serves a number of very important functions. If instantgram shut down tomorrow, it wouldn't matter at all. In fact, I think that if Facebook shut down tomorrow it would matter less than if the NYT did. I have no idea if the valuations are crazy, and I don't mean to be making a point about bubbles or anything else. I just think it might be a condition of contemporary capitalism that "importance" and "value" are in many cases unrelated.

_exec 15y ago
>>I think people are underestimating the importance of the NYT. If the NYT suddenly disappeared tomorrow, I'd argue that, at least in the near term, it would have far-reaching implications for the US as a society, as a political body, and as a culture. I think it would impact the course of global events in very real ways. The NYT, despite its market cap, is thoroughly integrated into the fabric of the US and serves a number of very important functions. Would you care to elaborate?
- ForrestN 15y ago
  Take politics for example. The NYT, far more than any other press organization, functions to expose or amplify information about scandals, secret agendas, government mistakes and abuse. It interviews, analyzes and reports on candidates for office in ways that routinely, as in maybe twice a month, significantly impact the trajectory of a campaign and subsequently an election. Another example is Wikileaks, where the NYT played a very important role on several sides of the story. The NYT is very much responsible, especially within the US, of amplifying, editing, and creating much of the narrative around the major Wikileaks dumps it was involved with. And they aren't always a force for "good", and have done a lot to damage Assange's reputation and helped marginalize Wikileaks. I don't think everything the NYT does is great, but they are a hugely important part of many many world-scale developments. You could write similar things about its role as an arbiter and editor of culture, about its influence on the public discourse and the ideas that permeate contemporary life, on its role in business and consumer culture (Foxconn, as a recent example). It touches so many things, and reaches so many, as those in tech might call them, "influencers," that it permeates American life, directly and indirectly.

mcbaby 15y ago

The New York Times, according to a quick Wikipedia search, has a (print) circulation of <2,000,000. They also have several hundred thousand users subscribing online (this number is to be taken with a grain of salt, it's my own estimate after perusing Google). The NYT has been around since 1851. Instagram was founded two years ago, and already has 27 million users--and its Android version is not even a month old. I know owning a company is different than investing in one, but if we stripped away their names and cultural stigmas, I think most people would innvest in--and own--Instagram over the NYT.

ArtB 15y ago
I think the point is that it is sad that yet another social media app is worth more monetarily than The New York Times which is one of the finest new sources in existence.
- mcbaby 15y ago
  But "worth" is such a subjective word. Instagram is only worth 1bn to Facebook, whereas the NYT's value is derived from its market cap. And being "one of the finest news sources in existence" (which I don't believe) does not necessarily denote monetary value. With that said, I'd assert that Instagram's value does not truly reflect its market value—it's only the value that Facebook saw in it. The NYT's value does reflect its true market value, as it's a publicly traded company. Again, I'd still invest in Instagram over the New York Times any day of the week.
- gavinlynch 15y ago
  "The New York Times which is one of the finest new sources in existence." Really? I've read the times for almost a decade and just can't agree with that statement. I hardly bother anymore, unless it's to peak at Thomas Friedman or David Brook's opinion columns. I just don't find the quality of writing I'm looking for. If I want to inform myself on an issue, I'm looking to the Economist, the Atlantic or Financial Times. NYTimes is barely on the radar to me shrugs Don't get me wrong, the New York Times is a phenomenal brand, but they're just a run of the mill above-average news source IMHO.

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yuxt 15y ago

Few years ago a 2 years old startup with no revenue was acquired for almost twice what New York Times is today. Now this startup helps to bring more than $1 billion in earnings. The name of the startup is Youtube.

vaksel 15y ago
Youtube is a whole different kind of animal though.
- ramblerman 15y ago
  I agree with you, but the criticism and general opinion was very similar. People didn't get it, and google was 'being silly'

guan 15y ago

“It’s hard to find a mathematics in which Instagram worth $1 billion in cash, but in pre-IPO stock, Facebook could stomach the hit.” This statement might make sense if Facebook were cash strapped, but in fact Facebook has plenty of cash. By paying in pre-IPO stock that is likely to be worth a lot more in a few months, Facebook is probably getting a bad deal compared to Instagram investors. It’s true that some people think Facebook is overvalued, but there are also analysts who believe Facebook is fairly valued (http://aswathdamodaran.blogspot.com/2012/02/ipo-of-decade-my-valuation-of-facebook.html http://aswathdamodaran.blogspot.com/2012/02/ipo-of-decade-my...), and few are arguing it’s as overvalued as, say, Groupon was at IPO.

Jabbles 15y ago

Is there a 1% chance that the enormous rate of growth of Instagram would have continued for a few more years to produce a social network the size (and profitability) of Facebook? If so, that's a justification for Instagram being worth roughly 1% of Facebook.

patrickgzill 15y ago

The NYT may well be worth less than its current market cap, given that it has a very high overhead in terms of its operating costs, has to manage a lot of people, and is losing money - see their own reporting at http://www.nytimes.com/2012/02/03/business/media/quarterly-profit-falls-12-2-at-times-co.html http://www.nytimes.com/2012/02/03/business/media/quarterly-p... The NYT is shrinking, Instagram is growing - that too, matters.

EricDeb 15y ago

Like all celebrities, Facebook is a bit insecure and likely overly paranoid about losing its choke hold on social/sharing. Obviously this was only a factor, but probably is the factor that pushed Instagram's value over the top.

jashkenas 15y ago

As someone who works for the Times, it's nice to see the general sentiment of value from folks in this thread. There are a bunch of folks saying that comparing acquisition price to market cap is apples vs. oranges, which may be true ... but how about market cap to market cap? By that yardstick, Yelp.com is worth 1.5 times The New York Times. http://www.google.com/finance?q=NYSE:YELP http://www.google.com/finance?q=NYSE:YELP

tazzy531 15y ago

Should be: the future value of Instagram is greater than future value of nyt.

shootthemoon 15y ago

I think that it is easy to confuse worth in terms of cultural value, historical value, and monetary value. Is Instagram worth more monetarily? Yes, in the realm of advertising, Instagrams user base is right smack in the center of the target demographic sought by many advertisers; the 12-30 crowds. Historically and culturally speaking, I believe that the NYT offers far greater value. But, who wants to spend $1B on historical value?

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voidfiles 15y ago

I think it's also safe to say that Facebook, and Instagram are worth more because they're more personal. In terms of the greater good, The New York Times probably serves a greater purpose, and it also costs more to run. In terms of the individual, Facebook is worth more to them. It seems like these social products deliver more value to individuals, and so going forward are going to be worth more then newspapers.

dpcheng2003 15y ago

People dismiss this company for being just a photo-sharing site and then one day, poof, it's worth $1bn. Pretty much just described Facebook too. http://venturebeat.com/2010/07/21/fred-wilson/ http://venturebeat.com/2010/07/21/fred-wilson/ Instagram took arguably the most important part of the mobile social process—taking photos—and made it cooler than everything else, including what Facebook, was offering. As for the NYT v. Instagram argument, I think we can all agree the NYT's social value may outstrip its economic value. The outrage about the decline of the NYT should've started when Craigslist started offering free listings.

wave 15y ago

Facebook know exactly how much Instagram is worth. They don't even have to ask the data from Instagram. They can just look at their own Facebook data to see how many of their users use the service. Also, every photo you see on the web has a Facebook Like button. They have all the data they need to make the decision. Looking at their data, Facebook feared that not acquiring Instagram is a risk to their business, so they rather lose $1 Billion than giving advantage to other social networking sites such as Google+. Mark Elliot Zuckerberg is determined to stay on top.

SandersAK 15y ago

apples, meet oranges!

gyardley 15y ago

Acquisition price reflects the value to the acquirer; market cap reflects the value to the shareholders. Neither reflects value to society - something completely unrelated.

kwamenum86 15y ago

Putting the word "worth" in quotes kind of makes this article "worth" nothing, doesn't it?

niels_olson 15y ago

The NYT needs to admit their mistake and heed Steve Jobs's advice from the grave: lower the subscription price. $5-10 a month? We'd all pay. $40 a month: are they crazy?!

og1 15y ago

I guess it is also worth slightly less than 800 AOL patents. I think it is just how much someone will pay for it vs "worth". How can you really arrive at an estimate that NY Times ~ Instagram ~ 800 Patents anyway?

dunk010 15y ago

Here's the thing: it's not real money. It was a part cash and part shares deal, and the facebook valuation is fantasy till they float. So what they were really arguing here is a) how much cash they could get out now and b) how much instagram is worth as a proportion of facebook.

hristov 15y ago

What this analysis fails to point out is that the NYT company has about 2.3 Billion dollars of liabilities. Instagram is presumably debt free. Thus if you look purely at the market value of the business, instagram is still worth less than one third of the NYT. People complaining about the troubles of newspapers tend to forget how in the nineties, when newspapers were doing very well, they all got greedy and loaded themselves with large amounts of debt in order to go on monopoly seeking acquisition sprees.

rayiner 15y ago

I wouldn't invest in an old-media newspaper company in 2012...

fierarul 15y ago

Might be a coincidence, but I think the title is suggested by this HN post: http://news.ycombinator.com/item?id=3820850 http://news.ycombinator.com/item?id=3820850 >the NY Times is valued at 900 million. >just sayin' I was a bit surprised reading that post and even more a few hours later when I read the title.

zallarak 15y ago

This is a ridiculously misleading post, cannot believe its on the front page. The NYT is worth approximately $1.5B. It's market cap is $928MM, its debt is $773MM and cash is $175MM. Enterprise value = Debt + Equity - Cash, so that puts it around $1.5B.

turar 15y ago
Market cap is a commonly used method to measure the company's worth, as determined by the market. If everyone agreed that NYT was in fact worth 1.5B, its market cap would have been 1.5B. Also, there are many companies that have negative EV based on that formula, yet are still functioning businesses.
- damoncali 15y ago
  That is totally incorrect. Market cap is the value of the equity, not the business.
  - turar 15y ago
    Totally incorrect? The value of the equity is simply "assets minus liabilities", a.k.a book value, which can be completely different from the market cap in dollar terms. And thanks for the downvote.
    - damoncali 15y ago
      Yes - totally incorrect. You are mixing up multiple concepts here. Book value is just that - what the accountants come up with for the books. The value of debt is how much the debt is worth. The value of the equity is how much the equity is worth (that is, the market cap). None of those are equivalent to the value of the company. Suppose I pay $60k in cash and take out a $240k mortgage to buy a house. The $60k is equity (market cap), and the $240k is debt. The value of the home is $300k. It works the same way with companies.
      - turar 15y ago

fleitz 15y ago

The revenue potential of the NYT is well known and has been steadily declining, the potential for the Instagram is largely unknown but it is known that the internet space is rapidly expanding. Instagram like the NYT is a business and as such is usually bought or sold with regard to it's potential to generate income, rather than it's social impact. The liabilities for Instagram are 12 people's salary and a few servers, the liabilities involved in the NYT are simply astounding, reporters salaries, print shop salaries, marketing salaries, buildings, etc. Instagram has people pay for the privilege of giving them content where as the NYT must pay others for their content, that difference alone is very important.

Shenglong 15y ago

In reality, the NYT would probably sell for much more, based on goodwill.

danbmil99 15y ago

The quotes can come off once FB goes public.

jakeonthemove 15y ago

News Corp acquired MySpace for $580 million - we all know what happened later...