Google now has an Instagram account. Some people might argue against me but I think that this signifies the encompassing relevance of Instagram these days. I remember when Facebook acquired Instagram for $1B (the amount was actually $730M due to Facebook’s stock price decrease of $31/share to $19/share when the deal was completed) and some naysayers thought that this was crazy and pointed to a tech bubble.
Consider the following:
- Instagram had zero revenues.
- It was only 551 days old.
- There were 30M users which made the acquisition at ~$33/user.
- The company had only 13 employees.
Fast forward to today and the service now has 200M monthly active users with an average of 60M photos shared per day. Since November 2013, some brands are advertising to this audience and they are supposed to be effective. Searching through Facebook’s 2013 annual report does not say how much revenue the company makes from Instagram but big-profile deals such as the one with Omnicom is valued at $40M. And Instagram is just starting. Luxury and mass-market brands use it to engage with Instagram users. It would be interesting to see how much money they will make once users can click to buy within the app.
But Instagram might be an exception rather than the rule and with recent multibillion dollar acquisitions (rumored or realized) and sky-high valuations, those people talking of a bubble must be frothing at their mouths by now.
Recent billion/multibillion dollar acquisitions:
- Youtube rumored to acquire Twitch for $1B
- Apple rumored to acquire Beats by Dre for $3.2B
- Facebook acquired Oculus Rift for $2B
- Facebook acquired Whatsapp for $19B
- Google acquired Nest for $3.2B
Recent multimillion fundings:
- Pinterest, the social bulletin board raised $200M at $5B valuation
- Uber, car service booking app is rumored to be raising a round at $10B valuation
- BitPay, solutions provider for merchants who want to accept Bitcoins raised $30M
- Attensity, natural language processing software for social media posts raised $90M
So are we in a tech bubble? Some argue that the dotcom bubble in 2000 was caused by a bunch of companies that IPOed without a revenue stream, a business model and pushing products to a limited audience – only 51M households/51% penetration. This time, companies have some form of revenue and operating in an environment with 279M users/87% penetration in the US alone and 2.9B users worldwide. It’s for this reason that I’m in the camp of saying there is not tech bubble just yet.
Which camp are you? I’ll leave you with a June 2011 Economist Debates: Tech Bubble for a great discussion on this issue.