In what is termed as over-valued purchase Facebook has bought photo-sharing app Instagram for $1 Billion in cash and stock. Instagram with its user base of 30 million users was just last week valued at $500 million. This is one of the biggest acquisitions after Google bought YouTube for a similar amount.
Is it really over valued deal for Facebook?
There are two ways of looking at it. First we have to note that Facebook will pay Instagram in cash and in 'stocks'. We all know Facebook IPO is in May and Facebook in itself is valued at $100 Billion. So the price decided for the stock for Instagram may lead to a lose or gain depending on the stock price during the public offering.
The second way of looking is that even without any revenue Instagram has the most important thing in web industry, the audience. With 30 million users and growing Facebook has approximately paid $33 per user. Facebook will recover this money through the best monetizing way, advertisements. Also we all know that Facebook has not quite captured the audience in the mobile web segment. For instance just a week after the launch of Instagram for android it has reached the no.3 spot in the top ranked free apps in Google Play. Facebook is ranked at no. 8. Buying Instagram will help Facebook to somehow capitalize in the mobile segment.
Changes to the user of Instagram?
For now there is nothing to be worried. But don't get surprised if you see an ad popping up right after you snap a picture of your friend. One more way of monetizing from Instagram would be of selling of filters. So when a new filter would be made available you may have to buy it.
