Instagram buy a sign of mobile froth?

Facebook’s announcement that it was snapping up Instagram, maker of a popular photo-sharing app, caused quite a stir among the social media sphere – mostly because of its jaw-dropping dollar value of $1 billion in cash and stock. The word “bubble” was on the lips of many who honed in on the price tag. “What does it say about the tech economy in general—and Facebook in particular—that a startup with exactly zero revenue and no particular business plan can be sold for a cool $1 billion?” asked Infoworld’s Bill Snyder. “If these events don’t indicate the rise of a dangerous tech bubble, nothing does.” But does the deal really indicate a bubble? That’s up for debate. Wired’s Andy Baio said that compared to other major acquisitions, it’s a fairly decent buy and not inflationary. “If we look strictly at the acquisition cost per user, Facebook got a relative deal with the Instagram purchase, paying roughly $28 for each of Instagram’s 35 million users,” he explained. “The median cost across all the acquisitions is about $92 per user.”

The New York Times’ Evelyn Rusli said the deal also reveals how important mobile is to Facebook’s future. “It implies that (Facebook CEO Mark) Zuckerberg saw Instagram’s meteoric rise as a potential threat, whether as a standalone service or in the hands of one of its rivals like Google or Twitter,” she wrote. GigaOm’s Om Malik agreed: “Facebook was scared…and knew that for first time in its life it arguably had a competitor that could not only eat its lunch, but also destroy its future prospects. Why? Because Facebook is essentially about photos, and Instagram had found and attacked Facebook’s Achilles’ heel—mobile photo sharing.” So has the mobile sector finally arrived? Quite possibly, said PaidContent’s Tom Krazit. “The competition is fierce, but Instagram has shown a new generation of entrepreneurs that it’s possible to build a huge following around a relatively simple mobile app and get quite rich in the process,” he wrote.

• Facebook and Instagram: Largest mobile-app deal ever? (GigaOm)

• The Instagram Deal: A Mark Zuckerberg Production (NY Times)

• Path, Instagram, and the Greater Fool Theory (CNET News)

• Instagram’s Buyout: No Bubble to See Here (Wired)

• The Naked Appeal of Instagram (NY Times)

• Facebook’s Instagram buy: The new dot-com bubble (Infoworld)

• Instagrammatical man (Reuters)

• Here is why Facebook bought Instagram (GigaOm)

• Facebook Makes a Play for Mobile With Its Instagram Scoop (NY Times)

• Facebook-Instagram deal: Smart buy or bubble? (CNN Money)