Few comments from an academic perspective:1) Mark repeats the old line… https://t.co/ofpjjrXckH— Paul Nary (@ProfPaulNary) April 19, 2024Facebook's $1 billion acquisition of Instagram in 2012 is hailed as a watershed moment.
At the time analysts called the $1 billion price tag for Instagram exorbitant.
However, the photo and video-sharing app today commands a staggering valuation of $500 billion, proving Zuckerberg's strategic foresight and risk-taking.A series of leaked emails, that first came out in 2020, showing a discussion between Mark Zuckerberg and his team before the Instagram acquisition, is viral again on social media.
On the revenue side, Instagram generated almost 30% of Meta's revenue in the first half of 2022, according to a Bloomberg report.
In 2020 and 2019, Meta listed Instagram’s ad revenue as $22 and $17.9 billion, respectively, it added.
Fascinating thread illustrating real world/real time thinking about corporate (not just business) strategy and a potential acquisition that turns out to be transformative for Facebook $META. Very cool.
Few comments from an academic perspective:
1) Mark repeats the old line… https://t.co/ofpjjrXckH
— Paul Nary (@ProfPaulNary) April 19, 2024
Facebook's $1 billion acquisition of Instagram in 2012 is hailed as a watershed moment. At the time analysts called the $1 billion price tag for Instagram exorbitant. However, the photo and video-sharing app today commands a staggering valuation of $500 billion, proving Zuckerberg's strategic foresight and risk-taking.A series of leaked emails, that first came out in 2020, showing a discussion between Mark Zuckerberg and his team before the Instagram acquisition, is viral again on social media. CNBC-TV18 has not verified the emails. However, the alleged conversation does shed some light on aspects that should be considered while planning an acquisition."How much we should be willing to pay to acquire mobile app companies like Instagram...These companies have the properties where they have millions of users (up to about 20m at the moment for Instagram), fast growth, a small team (10-25 employees) and no revenue," Zuckerberg wrote in the purportedly leaked email to David Ebersman, CFO of Facebook at the time. Ebersman oversaw the company's initial public offering in May 2012, which at the time was the largest US Internet offering of all time.Zuckerberg further wrote, "The businesses are nascent but the networks are established, the brands are already meaningful and if they grow to a large scale they could be very disruptive to us. These entrepreneurs don't want to sell (largely inspired our success), but at a high enough price -- like $500m or $1b -- they'd have to consider it...we're vulnerable in mobile..."Focusing on the "value creation" such an M&A would bring to Facebook, Ebersman's response made the point that integrating their products with Facebook to improve services was a "very compelling reason." However, he also made it clear that it requires clarity of vision for implementation and considering cost-efficient factors such as internal product improvements.Reacting to the trending leaked email, Professor Paul Nary, a corporate strategy professor at The Wharton School, took to the micro-blogging platform, X, to share his thoughts."This is at least a reasonably careful, thoughtful approach to doing a deal," Nary wrote on X, formerly Twitter.A question on everyone's mind remains though: Did Mark buy Instagram to kill the competition?Professor Nary opined, "Interesting thought process that considers something akin to "killer acquisitions" of competitors.. or maybe similar but not quite? Is co-opt and assimilate distinct from kill? I've been seeing many variations on the spectrum here."From an M&A point of view, Zuckerberg's conviction was well-founded, and what was initially thought of as a hefty price tag has turned into one of the most celebrated deals in Big Tech. The Facebook founder recognised Instagram's burgeoning user base and its potential to redefine (rather disrupt) the landscape of social media. The strategic decision underscores the importance of looking beyond short-term goals and eyeing long-term growth and innovation.Since its acquisition by Facebook in 2012, Instagram's user base has expanded from 30 million users to over 2 billion monthly active users worldwide (as of January 2024), higher than TikTok and WeChat, as per Statista. On the revenue side, Instagram generated almost 30% of Meta's revenue in the first half of 2022, according to a Bloomberg report. In 2020 and 2019, Meta listed Instagram’s ad revenue as $22 and $17.9 billion, respectively, it added.
