Introducing the $1bn app

Steve Dinneen
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What is Instagram?
It is an app, previously available for free on the iPhone and iPad but this week expanding to Google’s Android platform, that allows people to share photos with their “friends” online. It works a bit like a specialist Facebook, allowing you to post pictures to your profile, which are visible to people you choose to connect with.

What’s the big deal?
Instagram is part of a craze for vintage photography. The app lets you apply various filters to your phone snaps to make them look like Polaroid shots. It’s amazing what a sepia wash can do for a photograph.

Who uses it?
Well, it has between 20m and 35m users, depending who you believe, so quite a lot of people. It is famous for being loved by hipsters, with one cynical tweet pondering how much Mark Zuckerberg paid for every sepia photograph of an empty coffee cup. Demographic information is difficult to come by but anecdotal evidence suggests a high concentration of users in the 25-40 age bracket, the vast majority of whom are iPhone users (although this will inevitably shift with the release of the Android app), all of which is good news for Facebook’s advertisers – if they are allowed access to Instagram.

What’s its USP?
Well… It doesn’t really have one. It just does what various other apps do, only better. If Facebook can integrate its editing features into its platform, which it inevitably will (otherwise why pay $1bn for it?), it strengthens Zuckerberg’s already indomitable lead in the social network stakes.

But $1bn? Really?
It seems expensive but Instagram was one of the few firms that was better than Facebook at its core business: letting people share photographs. It may not make any money – it doesn’t currently place adverts and is free to download – but the value to Facebook is in staying at the head of the field and subsuming a rival before it has a chance to become dangerous. Sceptics, of course, argue that $1bn is a crazy price, indicative of a second dotcom bubble. Time will tell.

How will it change now?
That is debatable. Zuckerberg says he is “committed to building and growing Instagram independently”. So, in the short-term at least, users of the stand-alone app shouldn’t see too much change. The question is: after Facebook has integrated all of Instagram’s features, what will be the benefit of maintaining an app with no clear revenue model?