A billion dollars is a whole lot of money for something that was just an idea two-odd years ago. But then again, $100 billion for something that didn’t exist ten years ago seems out of touch as well, so it’s hard to fault Facebook for spending so much to buy Instagram.
In fact, it’s a great strategic move for them. Instagram does photo-sharing so much better than Facebook does, and add the fact that it gives Facebook a beachhead in so many other social media competitors, it makes perfect sense that Instagram is an asset worth that much to them.
Nevertheless, we hear a lot of people griping about Kevin Systrom and Mike Krieger (Instagram’s co-founders) stumbling upon a winning lotto ticket and how preposterous it is that a company who employs thirteen people, and has never made a dime, can be valued so astronomically high. The answer is quite simple: ideas are an extremely valuable commodity.
Instagram is a great idea with solid engineering to back it up. Their goal is simple: to provide an easy way for people to share photos. Adding some cool filters and the ability to sync with multiple social media platforms is why Instagram is so sleek and popular.
In 2010, the market for photography apps was as cluttered as a hoarder’s house. There were clunky and slow apps like the camera function on Facebook’s app, Hipstamatic’s slew of filters that didn’t have an easy share option and dozens of others in between.
Systrom and Krieger saw a niche for a simple point-and-shoot application that made sharing photos easy. They experimented with a prototype, worked out the bugs in beta testing before releasing Instagram in iOS only. The app’s usability built up a large following, only jumping into the Android market last week. That jump, and the subsequent surge in downloads, assuredly played a factor in Facebook’s purchase on Monday.
Instagram is a fantastic example of what apps can become and both Systrom and Krieger are expected to be pocketing $400 million from the sale.
The problem is that the gripers think that what Systrom and Krieger did was that easy. The truth is that they are so good at what they do they make it look easy. The ability to take an idea, build an app prototype, vet it, launch it, market it and scale it to mass use is a process that few can undertake successfully. It takes a unique skill-set to execute as well as engineers that understand the idea and can make the form fit the function.
If you have an idea for an app, we highly recommend setting up meetings with different engineers and finding one (or a team) that you feel comfortable enough with to enter into a partnership. You might be a sharing a fortune with them.