Facebook’s Acquisition of Instagram

Posted by on Apr 20, 2012 in News

Facebook’s Acquisition of Instagram

“Are we in a bubble?  Is a billion dollars a lot to pay for a two-year-old company with no revenues?  Maybe.  As Steve Katelman of Omnicom pointed out, the current market capitalization of the New York Times Company is under $1 billion–and for that valuation you get not only the Times but also the Boston Globe, About.com, and the Worcester Telegraph and Gazette.  But I don’t think any of us should be too hasty to assume that we are better business thinkers than Mark Zuckerberg is.  Facebook is worth north of $50 billion dollars and has a notoriously underdeveloped mobile strategy.  How much is it worth to protect Facebook’s vulnerable mobile franchise?

 

This is a weird moment for technology companies.  Starting a company is now incredibly inexpensive, and people who are starting companies know that they are one good idea away from enormous heaps of wealth, but it can be extremely hard to tell a good idea from a bad one.  In most versions of the story of  OMGPOP, the company pivoted repeatedly and designed numerous unsuccessful games before its instant overnight hit Draw Something was downloaded sixty million times by users who have produced billions of drawings, and the company was swifttly acquired by Zynga for $180 million.  But in fact, as Matthew Panzarino pointed out, Draw Something is not a new game: the web version of Draw Something is four years old.  The game went viral and started geysering cash only after OMGPOP developed iOS and Android apps.

 

So the current moment is not like the late nineties.  Developers don’t get rich just for showing up.  Developers get rich for showing up and having at least one really good idea.

 

So far, this has not happened to a single educational technology company.  Or has it?  It all depends on what one means by educational technology.  Does Google qualify, with its goal of organizing the world’s information?  Or maybe the best place to look for blockbuster viral education ideas is among non-profits.  Non-profit Wikipedia certainly qualifies as an education innovator that scaled massively because of a really good idea. Khan Academy is another non-profit viral success.  So is Slashdot.

 

I would not be at all surprised if, someday soon, Google or Facebook or Microsoft bought a young education company for over a billion dollars.  Education is at the core of civilization, and every other human activity now revolves around it.  If a great photo sharing platform is worth a billion dollars, then so is a collaborative learning tool that works.