Facebook and Instagram: All Systems Go!

by - 10:40:00 AM


Facebook and Instagram; what now?

Facebook just cleared its final hurdle before acquiring popular photo-sharing service Instagram: a “fairness hearing” held by the California Department of Corporations in San Francisco Wednesday morning.

The hearing ended with the statement both companies wanted to hear: “the transaction appears just, fair and equitable.” (Facebook was already cleared to buy Instagram by the FTC, which officially closed the book on its investigation last week.)

But this wasn’t just a rubber stamp. The hearing, whose witnesses included Instagram founder and CEO Kevin Systrom, turned up quite a few nuggets of interesting information about Instagram and its sale. Such as:

•  No one else put in an official offer for the company. Despite reports that Twitter and Apple were both interested in buying the photo-sharing startup — hence Facebook’s haste in buying it at twice its valuation — Instagram’s chief confirmed that there was nothing else on the table, though other (unnamed) companies were interested.
•  Facebook was working on its own photo-sharing service when it asked to buy Instagram. That’s according to Facebook’s corporate development executive Amin Zoufonoun, a former Googler, who referred to the “magic” of Instagram as preferable to the social network’s internal offering.
•  Instagram doesn’t make a dime. Well, we kind of knew that — there’s no revenue stream. But Systrom confirmed it for the hearing. Asked how the app makes money, he responded: “that’s a great question. As of right now, we do not.” Instagram was operating at a loss of $2.7 million a year, he said.
•  Systrom never expected it to be a billion-dollar deal. Since the money Facebook offered was a mixture of cash and stock, and Facebook stock has sunk since the deal was announced, the purchase is now worth closer to $735 million. But Instagram’s founder isn’t fazed. He never believed in the deal valuation as reported by the media, he said, but he does believe in the long-term value of Facebook.

Now that all official hurdles have been cleared, the Facebook-Instagram deal could be closed as early as this week.  What do you think Facebook will do with Instagram now?



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