Facebook Acquires Instagram. Now Panic and Freak Out!

What Just Happened

There have already been a billion posts on the Instagram acquisition, but so few of them contain good information or valid conclusions that I felt one more was necessary. This will be your conclusive source of what happened, why, and how you should react. How's that for clear simplicity?

To understand where Facebook is going, it's important to first examine where they've been. Facebook is a social sharing website and a historically dismal mobile presence. Their mobile site is kludgy, and their handheld apps add bugginess to the kludginess for an altogether subpar user experience. They have built a massive user base, but it has historically been anchored to the desktop web browser. And now they're gearing up for their initial public offering (IPO). If they want their stock to stay afloat after the IPO, they need to demonstrate strength and longevity.

To understand the value of Instagram, one need only look at what Facebook was lacking. In less than two years, Burbn, Inc. amassed 30 million users through one iPhone application alone. Days before the announced sale, they released a version for Android. Analysts were predicting their user base to top 50 million in no time. All of this was accomplished with no usable web site and against a mass of competition.

Hipstamatic creates square photos with filters. They even had a cool story of a field reporter shooting exclusively with their app in Iraq.

Camera+ easily has the most robust camera app in the iTunes app store, and they even have a real revenue stream; it’s a paid app.

Even Tumblr has a great app that makes posting photos insanely easy, with fantastic social features like comments, reblogging, and favoriting.

None of these companies could touch the appeal of Instagram. They took everything that the user really wanted and got rid of everything that the user didn't absolutely demand. (This includes their early foible of destroying the original photo and saving only the filtered version, which they later corrected.)

Taking a photo with Instagram was quick—though not as quick as some apps. Adding a filter was easy—though no easier than some apps. And sharing that photo with your friends was completely effortless—but only slightly more effortless than certain competitors.

Then they opened up an API to make it easy to play with all the data they had available.

With their user base as colossal as it is, Facebook still paid a bundle for each and every user they got. And despite this having been the biggest startup purchase in history, they might get their money's worth.

Or maybe it was a really expensive Myspace. Only time will tell. Zuckerburg very clearly stated that Instagram will be managed as a separate entity, apparently just as it is now.

What This Means for You

Clearly, we all need to delete all our data from Facebook and Instagram, then close our accounts, then run through the streets screaming. Furthermore, it would probably be a good idea to make a run on the banks, buy as much gasoline, bread, and milk as possible, and loot a local Internet startup. Finally, we should get a couple gallons of whiskey and three cartons of cigarettes. I don't care if you don't drink or smoke. We just need to panic! If hyperbole and/or sarcasm are lost on you, disregard this entire paragraph and start on the next one.

Well, if your Instagram stream is private, then you may want to read over Instagram's and Facebook's privacy policies. Facebook has a history of changing their own terms, so I can understand if you're apprehensive.

For the majority of us, however, the publicly available data will remain publicly available, and there isn't really much to worry about. You already know that the photos are geotagged and you should avoid posting from home, right? So that stays the same.

If you're a little concerned, you can back up your photos, though there's hardly much reason to do that either. For instance, your photos were all saved to your iPhone, so they're up in your iCloud or down in your iPhoto already. Either way, the answer is still, "You don't need to do anything."

Should you keep using the app? Well, yeah. Your friends still are—except the tin foil hat crowd, I'm sure. They're still public photos, and chances are decent that you already post more than half of them to your Facebook feed anyhow, right? They don't want to destroy your data. They want to encourage you to make more. So make more!

What You Should Actually Do

All you really need to do is pay attention. Here's where I get critical and point out that you should have been paying attention all along—not just to Facebook and Instagram, though. You need to pay attention to Twitter and Google and your local newspaper's website and Overstock.com and all the shady ops going on at GoDaddy.

Pop quiz: How many internet sites do you have an account on?

I know that very few of you will be able to answer that without any certainty. I know that several of you wouldn't ever be able to answer it with certainty, even if you spent a day going through old emails and combing your browser's history. You can bet I don't have the faintest idea. Nor do I have any idea what my hotmail password is.

Finally, I'm going to suggest you look over your stock portfolio or 401(k). Do you think one billion dollars is indicative of another bubble? I really do.

Between the insane number of people running startups with the goal of making a ton of money (and not the goal of making brilliant, useful things as well as a livable wage) the profound amount of money flying around in search of the next big thing, and the number of big things that are failing, I admit I'm a bit nervous. While it is probably unlikely to happen in the next year, a serious load of shit is going to hit a really big fan.

One More Thing

People are comparing the Instagram price to the valuation of the entire New York Times. The NYT market cap is at just over $943 million, but their circulation is barely over one million, and there's very little marketable data in those numbers.

The NYT creates and distributes information while Instagram only receives it. Don't get me wrong, I'm not a huge fan of the NYT, but read the WSJ and Fast Company links below to see how pointless this comparison is. There’s no point comparing apples to wind farms. Preposterous.

Fun Links

Export your photos with Instaport.

Om Malik wrote my absolute favorite post on this.

Interview with Instagram's Mobile Engineer.

The Wall Street Journal blows your mind about your location data and how much marketers love it.

Fast Company provides some scope with comparisons to other internet acquisitions.

I love this CNN opinion piece---especially the mention of a MetaFilter comment, "If you're not paying for something, you're not the customer; you're the product being sold."

The Guardian is always a great resource for very smart analysis and I love their comparison to the YouTube purchase.

This post was written by Terry Cabeen, or tcabeen on the network of your preference. He works an 8 to 5 for "the man" in an industry that doesn't give a crap about your bubbles or recessions: health care.

Header photo courtesy of Terry Cabeen.