A billion dollars is a lot of money for most people, even most companies. But what does it buy? In Microsoft’s case it buys patents and in Facebook’s case it buys a mobile startup.
AOL (Netscape) Patents
Microsoft spent $1 billion dollars on what seems like mostly Netscape patents. Presumably this is to declare war on Google, Apple, and the web at large, which is trivializing the Windows platform.
If this goes through and Microsoft gets this portfolio, it could be damaging to the web. Time will tell what happens here. It’s hard to say as patents, especially tech related are hardly clear what they refer to and are often used against anything that sounds vaguely similar.
This could be ugly.
Facebook felt Instagram, a scrappy mobile photo startup was worth $1 billion dollars. Presumably the value was in a dozen employees who can create such a popular and scalable photo community in a short period of time. It’s also about squashing their biggest competitor. Most people don’t realize this but Facebook is a photo site. It’s the biggest photo site. Flickr is essentially dead in the water as Yahoo figures out it’s future. Google hasn’t figured out Picasa. Instagram was Facebook’s only substantial opponent in this space. For $1 billion dollars they bought their competitor.
Long term I don’t see the app surviving. It will be merged in and perhaps Facebook will integrate photo sharing with a few other sites (Twitter, Flickr, Tumblr), but within the Facebook platform. It just doesn’t make much sense to do otherwise. It’s a lot of duplication and the integration between Facebook and Instagram isn’t up to Facebook’s usual seamlessness standard.
Instagram as a business likely wasn’t worth $1 billion. But the benefits of it being Facebook owned likely are.