City AM writes: On Monday....Wall Street was out in force. The most astonishing deal signed yesterday was Facebook’s $1bn purchase of Instagram. This was the social network’s biggest purchase to date and comes as a prelude to Facebook’s flotation – but the real story was that Instagram is just 551 days old and employs no more than 13 employees.
The firm had just 100,000 users on 13 October 2010, 200,000 a week later, 300,000 eight days after that and reached 1m by 21 December that year. Six weeks later, it had doubled again, and then again three months and a bit later. It had 27m at last count, which means that Facebook is paying about $37 each. Nice work if you can get it for Instagram’s founders and investors, and they have produced a great piece of software that allows mobile users to share photographs – but as we learnt during the global credit bonanza of the noughties, if it feels and sounds like a crazed bubble, it almost certainly is one.
It may just be that Facebook – run by the 27-year old Mark Zuckerberg – is clever enough to make its acquisition pay – after all, Instagram’s users upload 5m pictures every day and its new Android app has been phenomenally successful, with 1m downloads in just 24 hours. But others should beware: the last time people paid fortunes for users and eyeballs, rather than for cash flows, it all ended in tears…
Read more at http://www.cityam.com/latest-news/allister-heath/facebook-must-beware-return-the-dotcom-bubble-days
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