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> Facebook's value (cash and stock) 'flowed' to Instagram's owners because Facebook thinks Instagram will be worth even more to Facebook's owners. Wrong. The
by guynamedloren 15y ago
> Facebook's value (cash and stock) 'flowed' to Instagram's owners because Facebook thinks Instagram will be worth even more to Facebook's owners.
Wrong. The Instagram acquisition was largely defensive, due to Instagram dominating a space (mobile photos) in a way that would've eventually hurt Facebook. Facebook snatched them up early to prevent a huge competitor, and $1B was the price they had to pay. Nobody can argue that the team or technology was worth $1B, and Facebook will not see a big return on their investment - at least not anytime soon. Instagram doesn't even have an established revenue model.
- gojomo 15y agoThe fact that they gave up $1B proves Facebook (specifically Zuckerberg) thought they'll get something more valuable to them than that $1B. Even if the purchase was 'defensive' – preventing s competitor from using Instagram to chisel away at Facebook's monopoly – they expect the result of the deal, versus the alternative, to be worth even more to them than the $1B they gave up. (This is essentially tautological, unless you think Zuckerberg is irrational.)
- corford 15y ago>The fact that they gave up $1B proves Facebook (specifically Zuckerberg) thought they'll get something more valuable to them than that $1B. My guess is that the "something more valuable to them" is protecting their $100 billion valuation. It all makes perfect sense if you are prepared to suspend reality and accept that $100 billion is what Facebook is worth.