The Billion Dollar Baby
I remember when a million dollars was a lot of money.
So much so that CBS rose to the top of the ratings on the nights it aired the hit series, “The Millionaire,” from 1955-1960. This was a show where a guy named Michael Anthony would travel the globe bestowing the golden sum on anyone his boss, John Beresford Tipton, deemed worthy of it.
If a network were to resurrect that series today, however, they would have to call it, “The Multimillionaire,” since that million would be worth just over $10 million in 2012 dollars.
Instagram is used on an iPhone Monday in New York. Facebook is spending $1 billion to buy the photo-sharing company Instagram in the social network's largest acquisition ever. Instagram lets people apply filters to photos they snap with their mobile devices and share them with friends and strangers. (AP Photo/Karly Domb Sadof)
Money and media
But you may be wondering, since this blog is about the digital media, what does money have to do with the price of pixels?
A lot, as it turns out. And for starters, $10 million is a vastly outdated sum of cash in the game of buying and selling social media sites.
Billion Dollar Baby
I’m talking about the $1 billion (yes, with a “b”) that Facebook founder Mark Zuckerberg just paid this week for another social network – Instagram – that wasn’t even around two years ago.
Instagram was launched way, way back in 2010 by Kevin Systrom and Mike Krieger as a free photo-sharing application. To access it, all users have to do is shoot a digital picture, add on a filter, and then share it on several social networking sites include the Instagram site. The photos appear in squares, harkening back to earlier-day Kodak Instamatic cameras.
Dangerous rival
According to an article today in the online site, TechCrunch, Instagram was starting to be too much of a rival for Facebook to ignore.
“At 27 million registered users on iOS alone, Instagram was increasingly positioning itself as a social network in its own right — not just a photo-sharing app,” writes Josh Costine and Kim-Mai Cutler.
“And it was clear that some users were doing more of the daily sharing actvities on Instagram rather than Facebook’s all-in-one mobile apps, which had to be cluttered with nearly every feature of the desktop site.”
Instagram has just launched an app for Android phones and was on track to pick up as many as 50 million new users. According to TechCrunch, it had already picked up one million in the first week of the Android launch.
Under the terms of the deal, Instagram will remain a stand-alone app under its own name, but there will be increased ties and crossover possibilities with Facebook for users of both networks.
Here’s the kicker
But it was the writers’ next observation that shows – let’s see, how shall I put this – that smoke and mirrors only have value in the world of interactive digital media.
Mark Zuckerberg, who only a few years ago founded Facebook, has now acquired what he thinks is the next big thing: Instagram.
“Whatever you think of the price given the fact that Instagram had no revenues, the reality is it was going to be worth whatever Mark Zuckerberg felt like paying for it,” the TechCrunch writers say.
Keep in mind that we’re talking about a two-year-old company that – as Costine and Cutler say – has no revenues. Like other social media sites, the value of Instagram lies in the fact it draws such a huge critical mass of eyeballs to its site.
Visions of sugar plums
As we’ve seen with other sites – most notably the Facebook phenomenon – that is a scenario that makes advertisers salivate as they contemplate the exposure for their client companies.
As for Zuckerberg himself, here is his take on what the acquisition means:
“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.”
What lottery?
And if you’re still trying to wrap your mind around how much a billion dollars is, it is $344 million more than last month’s Mega Million jackpot of $656 million, which was the largest payout in lottery history.
And, once again, this billion dollars went for a company that made how much money?
