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The past one month has been interesting, to put it mildly. Facebook made an unprecedented move and snapped up Instagram for $1 billion. Earlier, Zynga snapped up OMGPop for $200 million (and change). The two deals have been put under the microscope by many (including myself.) However, here are three key lessons (and commonalities) between these two deals.
- Panic & Act Fast: Intel’s legendary CEO Andy Grove once wrote a book called Only The Paranoid Survive. It seems both Mark Zuckerberg and Mark Pincus read that book cover to cover. The speed with which Facebook and Zynga bought these two companies tells me that both Zuckerberg and Pincus are extremely paranoid about letting any competitor get big enough to threaten their business. The $50 million infusion was all that Instagram needed to hire more people, grow its footprint and gain further momentum, and then Zuckerberg swooped in. The decisions to buy both these companies at such rapid speed tell me one more thing – the two founder/CEOs are firmly in control of their companies, boards and self aware of their weaknesses. And to me that is a good thing.
- Engagement matters: Both Marks realize that the future of their business is not just the sheer size of their networks but engagement. The post-social world is an “attention economy.” If you don’t have engagement, you don’t have attention and if you don’t have attention – well you don’t have anything really.
- All mobile all the time: In an interview earlier this year, Mark Pincus was pretty explicit in his desire to conquer the mobile platform. He was also very candid that none of the social web companies have figured out the mobile and this included his company and Facebook. So if they have to buy their way into the market, so be it. Facebook is no different. The company’s mobile efforts are a work in progress. Instagram figured it all out. That said, these two deals are a big indictment of Facebook/Zynga’s mobile teams: it seems the two Marks are also saying, we aren’t really confident about what we have in-house.
On Facebook-Instagram deal, Nabeel Hyatt makes a point that all founders should read.
The best way to think about the value of Instagram is not to think about $1 billion or $30/user, it’s this: 1%. There is no market more strategically valuable to Facebook than mobile, and there is almost no product more valuable than photos for them. It was a very unique situation where a $100b company made a 1% bet.