The concept of a billion, which is a one followed by nine zeros, is generally reserved for measurements of all things massive. Because of this, when money is measured in billions, people take notice.
Earlier this month, a group of wealthy businessmen, including former NBA star Magic Johnson, proposed to purchase the Los Angeles Dodgers for a total of $2 billion. This caused a media frenzy, for it was the most expensive sports team purchase in history. While many pundits felt $2 billion was an exorbitant amount of money to spend on a sports team, others felt that because of the supposed talent behind the purchase, the business decision was sound.
However, when Facebook announced Monday it was purchasing popular photo-sharing application Instagram, which lets users instantly edit their photos, for $1 billion, the reaction was much less divided. While not the largest tech acquisition in history, the app’s rising popularity placed it on the tip of many people’s tongues. What started as shock quickly became apprehension as various media outlets attempted to process the purchase.
Professor of journalism and media studies at San Diego State Tim Wulfemeyer said the news media reacted the way it did for a number of reasons.
“One reason is money. It’s definitely a lot of money for something that kind of makes you say, ‘Hmm…,” Wulfemeyer said. “It’s also a bit of a threat to audience share. When you offer unique things to the public and other suppliers offer similar, or maybe different and better things, then you’re going to lose a little bit of your market share.”
Just two days after the purchase, organizations such as Forbes Magazine and CNN published articles and lists dealing with both Facebook’s potential motivations in the acquisition and speculating on its plans for the future. The purchase even elicited a response from The Daily Show’s Jon Stewart, who disbelievingly asked if the payment was made with “real money” for “something that kind of ruins your pictures.”
Instagram the app has more than 30 million users. Instagram the company has only 13 employees.
Though Facebook issued a statement expressing excitement about acquiring the small startup, the company stopped short of expressing the exact reasons for the purchase.
Professor Wulfemeyer said what may motivate Facebook’s decision is appealing to advertisers.
“They could bundle everything together, which adds more functionality and helps them keep, or maybe gain, new users,” he said. “It opens the door to a lot of potential new advertisers.”
In Forbes, writer Kashmir Hill listed “10 Reasons Why Facebook Bought Instagram.” In the article, Hill attempts to provide a clear explanation of why a company like Facebook would purchase an up-and-comer like Instagram. Her number one reason?
“Because it could.”