Instagram: – 1 Billion US$ For A Company that does not make Money!

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Unbelievable Cool 1 Billion US$  for a company that doesn’t make money yet and has not shown any plan for doing so in the near future. Facebook has acquired Instagram for $1 billion. No joke, Instagram was valued at 500million US$ a few weeks ago, meaning Mark Zuckerber and Co. paid double the actual price.

So was Facebook  scared of Instagram? I think so based on that amount. Clearly Facebook had a real competitor which had hit the right nerve, “photo sharing on mobile”. Facebook on its pure form is a desktop centered company, but the future is about the mobile. The sharing in any form is taking place on mobile phones and hence Facebook could easily be irrelevant in the near future without a clear cut photo sharing mobile platform. And as we seen in many occasion in  the tech world , the best way to deal with emerging  future focused competitors, is to eat them for lunch.

Now the immediate question is , will Facebook kill Instagram?  The same  fate which fell the likes of Gowalla, Beluga, Hot Potato, Drop.io, Snaptu, Digital Staircase and others.   Marke Zuckerberg says they will keep Instagram:

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.

But for now I don’t think the folks behind Instagram will mind that much about what  Facebook want to do with the app. I think they are busy celebrating nonstop.  According to the Wired

CEO Systrom owns 40 percent of Instagram, according to a source close to the company, who provided Wired with figures from 2011. That will net Systrom $400 million to take home as a result of the deal. Co-founder Mike Krieger holds about a 10 percent stake, and will net around $100 million. Benchmark Capital, the venture capital firm which led Instagram’s Series A funding round in 2011, has about an 18 percent stake, netting roughly $180 million from the deal. Andreessen Horowitz and Baseline Ventures, two investment firms backing Instagram, each have about a 10 percent stake, netting just under $100 million apiece.

The rest of the company’s 13 full-time employees will each get a portion of a nearly $100 million pool, with specific amounts awarded by how long the employee has worked at Instagram.

 

What is your opinion on the topic?
Kennedy Kachwanya
Lead Blogger at Kachwanya.com
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Kennedy Kachwanya is a technology blogger interested in mobile phones both smart and dumb, mobile apps, mobile money, social media, startups ecosystem and digital Savannah. New media must not forget the strength of old tech.
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