Facebook's announcement yesterday to purchase Instagram reminds me of another huge acquisition that happened some six years ago. Do you remember when Google announced the acquisition of YouTube in October 2006?
Here are 10 ways the two acquisitions are similar:
- Instagram is an emerging product people really love. YouTube was an emerging product many people really loved.
- Instagram is the de facto mobile app for mobile photos. YouTube was (and still is) the de facto source of Internet video.
- Instagram's usage numbers are currently ridiculously high, and the company's 13 employees are struggling to keep things running. When Google announced its acquisition, YouTube's 67 employees were struggling to keep things running.
- Many vocal Instagram users hate Facebook and think the social networking giant will ruin the product. Many vocal YouTube users hated Google and thought the search giant would ruin the product.
- Facebook managed to convince Instagram not to sell to Google. Google managed to convince YouTube not to sell to Microsoft.
- Facebook is buying Instagram for some $1 billion, the most it has ever spent on an acquisition. Google bought YouTube for $1.65 billion, the most it had ever spent on an acquisition.
- Many think Instagram is being overvalued by Facebook. Many though YouTube was being overvalued by Google.
- Facebook already has a mobile app for sharing photos (the Facebook app, a standalone photo app was merely rumored). Google already had a video website (Google Video, which was later relaunched as just a search function for videos, and then eventually killed).
- Facebook is keeping Instagram running separately from its main service. Google kept YouTube running separately from its main service.
- Facebook's Instagram purchase is the beginning of a new strategy to manage more than one brand, or at least I think so. Google's YouTube purchase was the beginning of managing more the one brand.
All these examples point to how Facebook seems to be making its own version of a YouTube purchase earlier than Google did. After all, Google had been a public company for some two when it bought YouTube, while Facebook is going public next month.
Google's challenge was to take on the bandwidth costs and figure out how to make a profit from YouTube. Facebook's challenge is similar but arguably also harder, or maybe it just seems like it because we can't look back and see how it did.
Facebook figuring out how to make a profit from Instagram is part of the bigger challenge of making money in mobile. Every advertiser faces the same problems in mobile: small screens, slower connections, and the strong relationship users have with their personal devices.
- Why Facebook acquired Instagram for $1 billion
- Facebook snaps up Instagram for $1 billion
- Does Facebook's purchase of Instagram ensure the photo app will come to Windows Phone now?
- Six new photo filters Facebook should add to Instagram
- Facebook buys Instagram: It's not about the photos or filters
- Delete Your Instagram Account and Keep Your Photos