If you are reading this, you are some ways connected to the business of Social Internetechnology. Yes new word alert.
then you have heard of Snapchat…and Instagram. Okay you have. You may also have heard that Facebook bought Instagram for $1b. [I did the painful task of converting to naira and eyed my ancestors for rearing only chickens and growing cassava]
So why didn’t they just clone it?
It wasn’t about market share since almost every one of Instagram’s 30 million customers were using Facebook – about 850 million or so at the time.
It wasn’t about revenue either. Instagram had $0.00.
The reason was that Facebook was convinced that this was the future of photo-sharing and would put their own business at risk (since Facebook, down to the truth is really about photos.
They knew that it would take at least 12 months to replicate Instagram and there could be a significant reversal of fortunes between the incumbent and the Startup. Buying rather than building means additional revenue; but at levels commensurate with Facebook’s – not the start-up’s.
Fast forward to 2016, it all makes sense. That $1B price tag represents just 2 weeks revenue at Facebook’s 2015 Quarter 4. And now, rather than being a minnow with less than 5% of Facebook’s users, the 400M (4Q15) Instagram users is a healthier 25% of Facebook’s current total.
So why didn’t Facebook buy Snapchat?
“Who knows? Maybe the chemistry wasn’t there,
Maybe Snapchat overplayed their hand,
Maybe Snapchat genuinely believe they would be better alone.
Their founder said something like they thought Facebook looked vulnerable.” What would he have said though.
Another interesting angle comes from leaked Sony emails. You heard about those right?
In 2015, Snapchat was valued at $15B and has 100M users, so Facebook’s probably thinking they could have gone higher than the $3B offer now…
By the aforegisted, another new word alert, It’s tempting to think Facebook should just pump Billions of $
because they own the universe into every adjacent start-up given this, but in fact there are too many, and many of them get shut out by TOL GateTM.
It’s still not clear where Snapchat will end up once the inevitable stars align or disalign.