Instagram: The Biggest, Shiniest New Jewel in Facebook’s Crown

On the heels of Instagram’s much-anticipated release on Android phones last week, Facebook today announced its intention to acquire the popular application for $1 billion.

Shh, listen. Can you hear that? It’s the sound of a million hipsters quietly sobbing.

Instagram, a free mobile photo-sharing app that enables a user to take a picture and then apply filters, borders, and effects that turn it into a lo-fi image in the style of a Polaroid — like something that your parents or grandparents might have once snapped with a cheap camera and then lovingly tucked away in a photo album. After the photo is saved, it can be shared among other Instagram users; emailed; or posted to Twitter, Facebook, Tumblr, Flickr, Foursquare, or Posterous.

Instagram is known for its simple, clean, easy-to-use interface, and for its devoted army of young, trendy followers who admire the nostalgic touch it imparts to their everyday photos.

Significance

Instagram had built a community of 30 million users over the two years since its initial release, despite it having only been available on the iPhone until last week. Since its brand-new expansion to Android, it’s attracted another 1 million users, and industry leaders had anticipated that the Android platform might help Instagram grow as much as 70 million more users in the near future.

Interestingly, just before the acquisition announcement Instagram was rumored to have been valued at $500 million  — just half of what Facebook will actually purchase it for. Did a bidding war with other companies drive up the cost?

Instagram is Facebook’s largest acquisition to date.

Intentions

Mark Zuckerberg, CEO of Facebook, said in his initial announcement that Facebook intends to keep Instagram functioning independently of Facebook — at least for now.

“For years, we’ve focused on building the best experience for sharing photos with your friends and family. Now, we’ll be able to work even more closely with the Instagram team to also offer the best experiences for sharing beautiful mobile photos with people based on your interests.

We believe these are different experiences that complement each other. But in order to do this well, we need to be mindful about keeping and building on Instagram’s strengths and features rather than just trying to integrate everything into Facebook.

That’s why we’re committed to building and growing Instagram independently. Millions of people around the world love the Instagram app and the brand associated with it, and our goal is to help spread this app and brand to even more people.”

Reactions

Some theories behind the surprising acquisition announcement have been offered so far:

Shutting down an epic rivalry before it could start. Facebook panicked about Instagram’s photo-sharing success and snatched it up before it became a major threat. By taking it out of the running, Facebook ensures that future profits get funneled to Facebook and no one else.

Growth potential. Facebook had been looking to improve its photo-sharing services — and Instagram was a ready-made platform with a built-in user base in the millions. Not only does Facebook get a boost of user numbers, it also (hopefully) gets some of Instagram’s “cool and hip” vibe to rub off on it.

Better mobile engagement — and profit. Facebook users don’t feel the love about the Facebook mobile app — it’s clunky and buggy. Furthermore, because the mobile version of Facebook can’t serve ads, there’s no monetary value there. Which is perhaps why Facebook turned its gaze on Instagram. By getting in now, when Instagram isn’t yet making any money, Facebook can groom this fresh-faced, dewy-eyed application that users already love into a legitimate revenue producer.

Moar info, plz. Facebook has gotten where it is by figuring out how to monetize information about users’ personal lives. Instagram, then, becomes another tool that Facebook can use to collect data about people and deliver them even more precisely targeted ads. And since Instagram is integrated with many other applications, the depth of the data-collecting pool is potentially quite deep.

Our take

I’m not convinced that Facebook felt so threatened by Instagram that it was forced to buy it out of competition. It’s true that both of the social networks are heavily invested in photo-sharing, but the similarities end there. Facebook is much more of a social “network” in the sense that you can use it to post text-only status updates and share links, music, and videos, and more. With Instagram, you can caption, share, and comment on photos — that’s it. Instagram is the cheese, but Facebook is the whole enchilada.

It is, however, a self-contained enchilada.

I think a substantial hint about the real reason behind the acquisition can be found right in the middle of Zuckerberg’s announcement :

“We think the fact that Instagram is connected to other services beyond Facebook is an important part of the experience. We plan on keeping features like the ability to post to other social networks, the ability to not share your Instagrams on Facebook if you want, and the ability to have followers and follow people separately from your friends on Facebook.”

In the end, it’s about the money. And the way you make money is by expansion. Instagram is a successful mobile application that doesn’t have the extent of Facebook’s capabilities but does have substantial integration with other social networks. Via Instagram, Facebook will potentially be able to reach users in completely separate social networks — and in so doing, turn that connection into a profit.

A quiet backlash?

But what do the people who actually use Instagram have to say?

Searching for “Instagram” on Twitter today resulted in more negative comments than positive ones.

Some passed around links to articles on Instagram alternatives, or how to back up your Instagram library before deleting it. Some expressed privacy concerns, and worried that Facebook will take ownership of their Instagram photos. Others simply expressed regret over the loss of a social network that truly felt like a close-knit community — a little Main Street app that fell to a big Wall Street corporation. Perhaps more befitting Instagram’s hipster reputation, some compared it to the feeling they get when a favorite local indie band’s sound goes Top 40.

All of which goes to show what an intense personal connection Instagram held for users — and makes me wonder if Facebook will be able to maintain that devotion through the next stages of Instagram’s development.

One thing’s for certain, though– we’ll see.