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But did Instagram have revenue? The question wasn't if investors back then had money, but if the company they invested in were making any money. Facebook had mo

But did Instagram have revenue? The question wasn't if investors back then had money, but if the company they invested in were making any money. Facebook had money, Instagram wasn't making any. So to me that's very similar. Also he's right that now that Instagram was valued at $1 billion, we're already starting to see others like Square immediately looking to raise capital at huge valuations, just because Instagram was valued so high. Besides, doesn't it even that even Facebook and others are valued based on how much more others will invest in it later on? That's pretty much how Facebook's valuation grew, and how they got the $100 billion IPO, too. But isn't that a flawed philosophy? Shouldn't companies be valued based on how much potential for making money they have in the future, and not how much potential they have to attract more capital at a higher valuation?

ericflo 15y ago
> But did Instagram have revenue? This is a tired argument. Everything is a tradeoff. In this case it's a tradeoff between adoption and revenue. Hipstamatic chose the revenue-first approach (they apparently made plenty of money) and Instagram chose the adoption-first approach. Which one is more valuable (and you must include strategic value in this evaluation!) right now? Clearly Instagram. > Also he's right that now that Instagram was valued at $1 billion, we're already starting to see others like Square immediately looking to raise capital at huge valuations, just because Instagram was valued so high. I'm very, very skeptical that this is the case. Has anyone involved in the situation made any statement hinting at that? > Shouldn't companies be valued based on how much potential for making money they have in the future Yep! That's what people are doing.
- dkrich 15y ago
  > Hipstamatic chose the revenue-first approach (they apparently made plenty of money) and Instagram chose the adoption-first approach. Which one is more valuable (and you must include strategic value in this evaluation!) right now? Clearly Instagram. Not necessarily. You're assuming that had Hipstamatic chosen the adoption-first approach they would have been a more valuable business. That assumes that both products are basically identical and the successes and failures turn only on whether the app is paid. Conversely, you're assuming that the only reason Instagram got such widespread adoption is because it was a free app. > Yep! That's what people are doing. Um, no they aren't. Most companies in the social space are valued based on how much hype they can generate, not how much money. A lot of people assume that an app like Path must be worth at least a billion. Is that based on money-making potential? I'm not buying it.
paulsutter 15y ago
Instagram is an outlier. If you have ever looked at raw Internet traffic you will know that Facebook is largely a photo site. So it was a choice for Facebook between a potential competitor and making a jump ahead. When these deals become commonplace, we'll be back to the bubble in full force. The rumor about Cloudflare worries me more.
sabat 15y ago
But did Instagram have revenue? While that's a valid question, one sale of one company does not a bubble make. We really, really have to stop saying "bubble" every time some company gets sold for a greater amount of money than we think it's worth.

ericflo 15y ago

> But did Instagram have revenue? This is a tired argument. Everything is a tradeoff. In this case it's a tradeoff between adoption and revenue. Hipstamatic chose the revenue-first approach (they apparently made plenty of money) and Instagram chose the adoption-first approach. Which one is more valuable (and you must include strategic value in this evaluation!) right now? Clearly Instagram. > Also he's right that now that Instagram was valued at $1 billion, we're already starting to see others like Square immediately looking to raise capital at huge valuations, just because Instagram was valued so high. I'm very, very skeptical that this is the case. Has anyone involved in the situation made any statement hinting at that? > Shouldn't companies be valued based on how much potential for making money they have in the future Yep! That's what people are doing.

dkrich 15y ago
> Hipstamatic chose the revenue-first approach (they apparently made plenty of money) and Instagram chose the adoption-first approach. Which one is more valuable (and you must include strategic value in this evaluation!) right now? Clearly Instagram. Not necessarily. You're assuming that had Hipstamatic chosen the adoption-first approach they would have been a more valuable business. That assumes that both products are basically identical and the successes and failures turn only on whether the app is paid. Conversely, you're assuming that the only reason Instagram got such widespread adoption is because it was a free app. > Yep! That's what people are doing. Um, no they aren't. Most companies in the social space are valued based on how much hype they can generate, not how much money. A lot of people assume that an app like Path must be worth at least a billion. Is that based on money-making potential? I'm not buying it.

paulsutter 15y ago

Instagram is an outlier. If you have ever looked at raw Internet traffic you will know that Facebook is largely a photo site. So it was a choice for Facebook between a potential competitor and making a jump ahead. When these deals become commonplace, we'll be back to the bubble in full force. The rumor about Cloudflare worries me more.

sabat 15y ago

But did Instagram have revenue? While that's a valid question, one sale of one company does not a bubble make. We really, really have to stop saying "bubble" every time some company gets sold for a greater amount of money than we think it's worth.