Opinion: Facebook's billion buyout of Instagram smacks of an industry hooked on its own hype

Just what did Zuckerberg pay out for?

Opinion: Facebook's billion buyout of Instagram smacks of an industry hooked on its own hype

It's hard to imagine just what I'd spend my money on if I suddenly had billions in the bank, but a holiday in the sun and a nice car would more than likely top the list.

I'm not too proud to admit that buying out Instagram would probably never even enter my head.

The obvious conclusion to draw from that is that Mark Zuckerberg is a somewhat more successful businessman than me, able to spot the 'next big thing' and pounce accordingly.

Nonetheless, Facebook's decision to buy the photo sharing tool worries me. Not because Instagram's success to date isn't clear for all to see - 50 million downloads and counting nothing to be sniffed at - or even because of the massive amount of money Zuckerberg was willing to splash on it.

Rather, it's the reasons behind the buyout that have made me nervous, if only because the acquisition sets a precedent I'm concerned the rest of the industry may keenly follow.

Investigating Instagram's allure

Initially, what I couldn't fathom when the news of Instagram's acquisition broke was just what Facebook was getting for its money.

As I said, there's no denying Instagram is amazingly popular right now. What's curious about the app, however, is it doesn't actually do anything unique.

Both before and after its inception, software that enabled users to apply effects to photos on their smartphones on the fly were already on the market. A fair number also allowed you to share your creations with your friends, albeit not always as easily.

In short, there's nothing Instagram does that Facebook itself couldn't knock up in an afternoon. The concept of making images look retro is clearly a popular one, but there's no one area of its business that those behind Instagram could claim to have sole ownership of.

What the company does have, however, is a powerful brand. Instagram has been able to make a smooth transition from an app everybody tried as a one off to a tool people now routinely use with each and every photo on their smartphone.

Brand power

Just how Instagram has managed this should not be underestimated. Indeed, so strong is the app's connection with its userbase is that many Instagram fans were horrified by the Facebook buyout, worried the intrinsic 'coolness' the app has amassed would be lost within a heartbeat.

The problem Instagram's creators would have grappled with in the future had it stayed independent, however, is the inevitability that someone, somewhere, would come along and do photo editing and sharing a lot better.

When the strength of your brand is your unique selling point, then there's very little to stop a competitor with knowledge of how the market works coming and pulling the rug from underneath you.

For Instagram, therefore, the timing of Facebook's buyout couldn't be better. Whatever happens in the photo sharing arena, its creators have already made a lot of money.

For Facebook, however, the reasoning behind its move is less clear.

Though the social network has kept tight lipped about its motivations, the common perception is this was a defensive buyout. Concerned the Instagram brand was pulling users away from sharing photos on Facebook – mobile an area where the company itself admits it still has a lot to learn – it bought the app to nullify the threat.

But the product Facebook acquired isn't one packed with new technology previously out of its reach. Nor is Instagram a platform full of unique sharing tools it couldn't hope to emulate. In reality, Facebook has paid out for an app that, on the face of it, is actually just a little bit 'trendy'.

Caught in a bubble

Looking ahead, the worry that a rival will pop up and serve up a more edgy alternative is one that's been shifted from Instagram itself to the app's new owners at Facebook.

With the money he has to hand, there's little to stop Zuckerberg forking out to buy a few of those rivals to be if and when they appear, too. But when major industry players start paying out vast sums for firms on the premise that they're the 'hot' thing right now, then you've got an industry that has an over-inflated opinion of itself.

For me, an app like Instagram always comes with a shelf life. Any 'demise' might still have been years away, but I'm unconvinced people will still be using it as a matter of course all too far in the future.

I'll go on record now and say that the whole thing appears a bit of a fad to me and, if I'm right, Facebook's decision to acquire the business seems especially short-sighted.

The social network has now laid the groundwork for an industry that makes acquisitions motivated by hype and potential, rather than one where companies move for firms that offer something unique.

It's a trend that smacks of the 'dot-com bubble' that gripped internet investors in the late 1990s, when speculation and false hopes of future growth dominated the agenda.

Not everyone has the vast coffers of Facebook, and if Instagram's buyout is a sign of things to come, then it won't be long before other big business start making bad calls and paying out for the wrong apps at the wrong time, dragging down vast swathes of the industry with them in the process.

Keith Andrew
Keith Andrew
With a fine eye for detail, Keith Andrew is fuelled by strong coffee, Kylie Minogue and the shapely curve of a san serif font. He's also Pocket Gamer's resident football gaming expert and, thanks to his work on PG.biz, monitors the market share of all mobile OSes on a daily basis.