Why Facebook bought Instagram and what it means for Apple and iOS

With Facebook buying Instagram, the world's largest social network site scooped up one of the fastest accelerating social network apps. The cost for the acquisition was $1 billion in stock and cash. That's roughly twice what many thought Instagram was worth, which raises the question -- why?

It wasn't for the technology behind the social platform or the raw numeric user base. Facebook is the social network already, with a footprint larger than many terrestrial landmasses. It wasn't for the photos or fancy filters. Facebook is already the largest online photo repository on earth, and larger by such a degree that very little else can be seen outside their shadow. And a company one one-millionth the size of Facebook could come up with their own filter pack, or just clone Instagram's, faster than even the Google Play Store would approve the app. It wasn't for that app either. As buggy and beleaguered as Facebook for iPhone is, Instagram isn't exactly a user interface or user experience triumph. Viewed simply as a camera replacement, it's serviceable but not inspired, usable but not delightful.

Taken piece by piece, it's hard to see anything particularly attractive about Instagram that warrants a $1 billion pay day. But taken together? Taken as the sum of its parts? More than serviceable, more than inspired, and absolutely delightful.

Facebook just bought an incredibly fast growing social network with a passionate, engaged user base -- that's .

In a way, it's like IBM buying Microsoft just as DOS was about to get going. Or Yahoo! buying Google just before AdSense became a cash cow. Or Google buying Facebook back when a billion dollars would still have been cool.

Instagram was by no means poised to replace Facebook in any way resembling any of those previous generational shifts, but it was specifically poised to cause Facebook a huge amount of pain in areas where Facebook is extremely tender.

By easily letting users share photos in a way much funner, cooler, and mobile-centric than Facebook, like IBM with Microsoft, Yahoo! with Google, or Google with Facebook, Instagram left Facebook ill positioned to respond.

While it's almost terrifying to think of Facebook as the old guard or the establishment, the acceleration of mobile has made Facebook exactly that. Where IBM was a mainframe company at the dawn of PCs, Yahoo! a directory company at the dawn of ad-auctioned search, and Google a search company at the dawn of social, Facebook is a web company in a world increasingly dominated by mobile apps.

Other than as a way to enable cross-platform sharing and account management, and to serve as a billboard encouraging app downloads, Instagram barely even has a website in the traditional sense.

The more users go mobile, the more photos are shared on Instagram, the more friends tharey made and comments are exchanged there, the less time users have to spend on Facebook. As much as Facebook intercepted and walled off traffic that might have gone to Google (through an "open" web filled with Google served ads), Instagram was beginning to intercept and wall off social photography traffic that might have gone to Facebook.

No one ever sees their own disruption coming, but smart companies can act the moment it first shows up on their radar. Instagram was certainly showing up on Facebook's radar, and what better way to beat them than to buy them?

Facebook gets an injection of young, hip blood. Instagram gets deep pockets to either continue whatever strategic vision they had pre-acquisition (if they had one other than acquisition, that it), or to bring them into the greater Facebook experience. Right now Facebook claims they're going to keep Instagram "as is", but it's best never to trust giant corporations still in the heat of new purchase. For every YouTube there's a Flickr, for every Siri there's a Jaiku.

Either way, it's almost certainly business as usual for Apple. With iOS, Apple is already incredibly well positioned in mobile and while Photo Stream isn't a great mobile photo solution, Apple has the capability to improve it on their own. The increased quality of the cameras on both the iPhone 4S and iPad 3 show photography is a priority for them, as did the comments from Steve Jobs on photography still being in need of innovation.

While the idea of an alternate universe "What if Apple had bought Instagram instead of Facebook?" story isn't without it's theoretical appeal, it's also without any apparent upside. Sure, Instagram built into iOS would have given the iPhone filters like many Android interfaces have, and a social network on the opposite end of the hip spectrum from Ping. However, it wouldn't have helped Apple do the only thing Apple exists to do -- make more money for Apple.

A Facebook owned Instagram, as long as the app stays available for iOS, is pretty much the same as an independently owned Instagram. If Apple had, or ever would plan to integrate Instagram into iOS the way they did Twitter, previous differences with Facebook could now make that less likely, but certainly not impossible. And if Facebook ever scraps the iOS version, say to make it exclusively for, and central to, an Android-forked Facebook phone, it wouldn't be too hard for Apple to roll their own filters and turn on some form of commenting system. (Make all the Ping jokes you want, but hundreds of millions of users with sudden access to a Twitter-integrated social network for photons would fill an immediate gap, if nothing else.)

For iPhone users, the situation is pretty much status quo as well. You can export your Instagrams and kill your account if even the whiff of Facebook is too much for you. But day to day, photo to photo, it's going to be business as usual for everyone involved, and it'll likely remain that way for the foreseeable future.

Facebook bought Instagram precisely because they weren't Facebook, but could become something... next. While Instagram may or may not be worth $1 billion, being ahead of the disruption curve certainly is. And the best way to ensure that continues is to keep Instagram as not Facebook.

Rene Ritchie

Rene Ritchie is one of the most respected Apple analysts in the business, reaching a combined audience of over 40 million readers a month. His YouTube channel, Vector, has over 90 thousand subscribers and 14 million views and his podcasts, including Debug, have been downloaded over 20 million times. He also regularly co-hosts MacBreak Weekly for the TWiT network and co-hosted CES Live! and Talk Mobile. Based in Montreal, Rene is a former director of product marketing, web developer, and graphic designer. He's authored several books and appeared on numerous television and radio segments to discuss Apple and the technology industry. When not working, he likes to cook, grapple, and spend time with his friends and family.

  • ...Pinstagram... ;-)
  • Very insightful article!
  • Hi David, the article is not insightful. Its misleading. Its content is based purely on opinion without any real knowledge about the aquisition, M&A, even basic economic models. I'd forget i've read it.
  • Yeah, it's an editorial -- an opinion piece.
  • Did you actually write and publish an article with the word "funner" in it? Seriously?
  • Yes, we've been doing that since Apple decided to call the 2008 iPod touch the "funnest iPod ever", the same way we used "phone different" in homage to "think different".
    Please feel free to go troll Grammar Girl in your no doubt copious spare time :)
  • I'd remove the glass, clean it, and then replace the adhesive strips with new ones.
  • while I agree the title should have "opinion:" added to it, it is relative and offers something on the subject. You may or may not agree with what's written, but I find it hypocritical to criticize it without offering anything in return. If you are so insightful, maybe you can offer a differing opinion ? you have offered nothing to this discussion.
  • Who cares when they launch it? You have no control over when they do!
  • This article is overly confusing.
  • Sorry, let me try to tl;dr it: No one ever sees their competition coming. IBM got replaced by Microsoft got replaced by Google got replaced by Facebook. Facebook, smartly, is buying a competitive threat before it becomes so disruptive and so valuable they can’t buy it anymore.
    Just like mainframes shifted to PCs shifted to Web shifted to social, they’re shifting to mobile now and Facebook is smart to buy into it before they get replaced by it.
  • No, because Facebook was actually smart enough not to ignore a more future-savvy competitor. Instead, they bought them out.
  • instagram is the most annoying app on facebook.
  • No its not. it's the games that people play on their phones which they connect with their facebook is annoying. All i see on my news feed these days are family feud, slotomania, people leveling up when building a house?!?! thats annoying! game apps are ruining facebook IMO
  • That was excellent, and definitely cleared up the very basic "why" question.
  • However confusing or limited the article may have been, I'm finding the comments section to be even moreso. Have there been a bunch of comment deletions, to which other commenters are responding? Folks seem to be enthusiastically (or angriastically) at least a couple of now-invinsible comments near the end.
    That's how it goes, sometimes, I guess. I used to fuss endlessly about the low-quality posts from mean-spirited readers. Maybe this is what happens when one gets super serious about cutting the fat.
  • It's so weird that the last 3 posts (as this time) were actually posted earlier in the day than my post - yet mine is #8 and theirs are #'s 10, 11, & 12.
  • Why does he need to stop the music? The music already tops automatically on the iPhone, so Android must have it too.
  • I think this was a purchase at a premium to do nothing more than cap the possibility of Instagram.
  • Good article Rene. i think that most of the comments are uncalled for. Like you said before its a editorial, so take it for what it is. I think that it was a smart move for Facebook. Instagram has caught fire recently and they did the right thing buy eliminating any type of competition.
  • Good article, enjoyed it!
  • You were right they bought out a competitor and it would be frightening if they remain independent and come out with something like Facebook but in photo form.
  • I'm afraid of Facebook. I had downloaded instagram onto my 4S but never used it. Now I have deleted instagram.
  • I I agree with Microcosmos, the article definitely answers the basic "why" question. And makes sense to me. The whole acquisition was a little confusing to me but this angle provides some sight into what might be going through zuckerfoos mind. ... also, stop trolling you guys. It was an opinion piece not based on fact.
  • Want to sell your Iphone to get the Iphone 4?