Monday, April 9, 2012

Facebook += Instagram: has era of consolidation begun?

Facebook made an announcement today that they are acquiring Instagram for $1 billion.  Blogosphere and tech news sites are buzzing with reactions to this announcement.  Aside from being awestruck by Instagram's meteoric rise to 30 million users with team of 13 over 2 years, there are a few common questions that everyone seems to be asking.  I thought I might add my own question to this mix.

Congrats to the Instagram team!
Will this be the end of Flickr integration?
Will Facebook start buying social network sites with all the cash that it's getting from pending IPO?  In other words, has the era of social network consolidation officially begun?

Although Facebook may not want to admit it, we may be seeing the start of selective consolidation.

Facebook has acquired Instragram for specific reason.  They wanted to get rid of growing competitor and complement their relatively weak mobile photo sharing experience.

Everyone knows that mobile will be even more important platform in future.  Studies project that by 2016 there will be more number of mobile devices than entire world population.  Given this explosive growth of mobile and most of social networking users are increasing using mobile to share data, Facebook had to face Instagram's challenge.

Early Facebook users will recall that Facebook started out as photo sharing site at Harvard dorm rooms.  Seeing Instagram's fast user community growth, Facebook needed to respond quick and decisively.  Before Instagram becoming a bigger threat, Facebook has eliminated competition and augmented their network with popular mobile app and its user community.

Facebook has demonstrated that it's perfectly capable and willing to remove competitive threat by buying it out.  This sets up a precedent for Facebook to follow.  Mark Zuckerberg may deny that this won't be repeated, but ultimately it's up to kind of competitors Facebook will encounter in future.  Given credible threat, Mark has proved that he can and will act with decisiveness.

Another interesting thing to note is Instagram's sharing capability.  At its core, Instagram is an artsy photo publishing tool.  It works with Facebook, Twitter, Flickr, Tumblr, Foursquare and Posterous.  For Instagram, sharing its photo with these social networks were one of the keys to gaining wide acceptance.

From Facebook's perspective sharing data on other social networks is not Facebook's mission.  Facebook has been all about guarding the data within their walled garden.  It's well known that Google accused of Facebook for making it difficult for users to move their data from Facebook to other networks.

Given this history, it's interesting how Instagram will change.  Instead of courting other social networking sites, Instagram may choose to stop supporting Flickr for example.  Considering soured relationship between Facebook and Yahoo, that may be the first change that we may expect from new Instagram.

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