back to article Zuckerberg blew $1bn on Instagram 'without telling Facebook board'

Facebook CEO Mark Zuckerberg left his board out of the loop as he personally hammered out a $1bn deal with Instagram for its colour-changing photo software in three days of negotiations in his house in Palo Alto, culminating in the deal on Sunday 8 April, a report in the Wall Street Journal claims. Citing a person familiar …

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  1. Marvin O'Gravel Balloon Face

    You've got to laugh.

    Makes for an interesting study on the psychology of certain CEOs.

    1. Random Handle

      Re: You've got to laugh.

      ...my first thought was I bet they got him with, "you know what is cool?... a billion dollars".

      Still, its nice work if you can get it.

      1. Anonymous Coward
        Anonymous Coward

        Re: You've got to laugh.

        except it was. erm, 2 billion sounds nice.

        but even moron f.. kerberg aint that bleedin stupid.

        1. AndrueC Silver badge
          Joke

          Re: You've got to laugh.

          I dunno why you're all laughing. He got them down from $2b to $1b. That's a fifty percent cut, ya know. 's not often you can argue a seller into that big a haircut. It's usually only possible when the seller is of 'questionable moral or legal standing'(*).

          (*)Or a bank in the case of Greek sovereign debt :D

          1. boltar Silver badge
            WTF?

            Re: You've got to laugh.

            "I dunno why you're all laughing. He got them down from $2b to $1b. That's a fifty percent cut, ya know."

            A 50% cut on something that is worth buttons is hardly deal of the century. Nutterberg has lost his marbles. Photo file sharing with noddy picture modification facilities, hmm, call me a cynic but I smell 3 month fad at $33 million a day.

            Pinterest anyone? What, you've forgotten about februaries Most Trendy Site Ever Ever Ever already?

          2. MIc
            Thumb Up

            Re: You've got to laugh.

            lolz * 1000

          3. Doug Glass
            Go

            Re: You've got to laugh.

            So if you talk the store manager into charging you $100 in place of the $200 asking price for a $50 pair of shoes you'll feel good about getting a great deal? Interesting.

            1. AndrueC Silver badge
              Facepalm

              Re: You've got to laugh.

              Did any of you guys wonder why El Reg provided a joke alert icon?

              1. Dozer
                Thumb Up

                Re: You've got to laugh.

                "Did any of you guys wonder why El Reg provided a joke alert icon?"

                Apparently they didn't make it big enough...

          4. Giles Jones Gold badge

            Re: You've got to laugh.

            When the owners of Instagram heard it was Zucker calling them up they doubled their price.

    2. Armando 123

      Re: You've got to laugh.

      Funny thing. He's going to find that being a guy who builds a company from scratch is WAY different from being a CEO. Look at Jobs: built Apple's business, the suits got him fired, and he learned his lessons in the wilderness before he returned. And EVEN THEN he set up a culture of secrecy and need-to-know that is rare (or rarely as effective & successful).

    3. beep54
      Devil

      Re: You've got to laugh.

      You need to change the word 'psychology' to pathology'.

  2. Eddie Edwards
    Pint

    Oddly

    Oddly enough, I assumed that was what had happened. Having kids myself.

    1. Anonymous Coward
      Coffee/keyboard

      Re: Oddly

      ^^Brilliant

  3. NomNomNom

    There's no way it can be worth that much. I wondered why it had been bought for such an excessive price. If the board weren't informed then that kind of explains it imo.

    But then again what do I know. Maybe a photo app really is worth more than the GDPs of many small countries.

    1. Lee Dowling Silver badge

      It's not.

      And then they excuse it by saying it's to suck up someone who might have been a competitor. But, still, that's a stupidly hefty price even for "Facebook 2", to be honest.

      But in this land, the zeroes are just a number, that's all. You don't have to prove their worth, so long as you have enough zeroes of your own. There's honestly no reason to buy them at all. You could build a competing feature for a few tens of thousands that would be available on MORE platform than Instagram exists on, and do a better job. It wouldn't even take that long (probably not as long as the buyout negotiations would take).

      But all these companies are valued in the billions and have almost zero income streams. Seriously. This is "dot-com bubble" all over again. Hell, you have to pay half a million to (possibly) own a single TLD for yourself and still people are doing that for little reason compared to having a bog-standard dot-com or similar.

      Even Facebook - they have no income stream to justify their valuation at all. They make money, sometimes, but they don't make enough for anyone involved in their initial investment or future buyouts to actually SEE anything near the amount of money they think.

      It's an "SCO damages" style financial operation. Think of a number, make it bigger and more impressive, pretend that it's justifiable.

      Seriously, if you put ANY of these companies on Dragon's Den, they would be laughed out of the place based on their valuations and actual income alone (not even *projected income*).

      Now Google - Google MAKES money, purely from advertising, and has almost nothing to pay back. Hell, Google could make enough money off using their ads on Facebook *to* fund Facebook if that were to ever happen. They would actually profit. But even then, to pay off the investors or live up to their mysterious valuations would be impossible in any sensible timeframe.

      But Facebook / Instagram? They don't make money. The money they do make would be insufficient to base a business on. They certainly would never pay back any investments or live up to valuations if necessary. And even projecting 50 years in the future with 10's of %'s of growth each year, they'd be hard-pushed to live up to the hype.

      This valuations mean nothing. If you paid even a million for Instagram, you're an idiot. And people WILL get rich off the back of things like this (of course they will). But, inevitably, one day someone will find out that the company's not worth tuppence. That may not be the same person who bought it. And, especially in social networking, trends and fashions die fast (anyone remember Geocities, MySpace, FriendsReunited?)

      Like FriendsReunited: Valued at £175m at one point, changed hands a couple of times, and today is worth about £5m, if that. They once made £22m a year in profit. That's less than 7th of the "valuation" of the company at the time in one year. But it's now not worth, in total, everything together, one quarter of that year's profit. Someone made £100's of millions out of it. That money never really existed, though, and now it's worth not very much (your average private primary school is probably worth a lot more than that).

      The trick is to NOT be the person holding the hot potato when things start to turn into reality.

      1. Cliff

        Nice summary

        Have we learned nothing since last time?

        1. Armando 123

          Re: Nice summary @Cliff

          You and I may have; Zuckerberg wasn't in the workforce when the .com bubble collapsed.

      2. Nick Ryan Silver badge

        Agreed - good summary. However you missed one point:

        The CEO of instragram did a fantastic job of selling his largely worthless* company for a ludicrous amount of money - we really have to give him credit for that.

        *as in no income - the real value is really what somebody is willing to pay for it.

        1. miknik

          we really have to give him credit for that.

          I'm guessing he doesn't need credit any longer

      3. Beachrider

        Facebook doesn't IPO until May...

        It is only a few weeks away, but Facebook IS a private company until that time. It is a sure bet that this transaction will be examined for abuse, but it wont be the SEC, NYSE or other publicly-traded security authorities.

        The only part that makes sense is that Instagram has some Intellectual Property that Facebook wanted. I haven't seen anything to establish what that IP was, though.

        If the CEO needs the assent of the BOD to do a 1% purchase, then there will be trouble for the CEO. If it is within his charter, then he is expected to do it. Facebook is a privately owned company right now, their rules are their rules.

  4. JDX Gold badge

    13 employees and no cash flow

    wow

    1. Anonymous Coward
      Anonymous Coward

      Re: 13 employees and no cash flow

      13 employees and $1billion....bigger wow!

      1. Destroy All Monsters Silver badge
        Unhappy

        Re: 13 employees and no cash flow

        Anyone remember when the whole of MySQL AB was valued at 1 billion and people complained?

        It feels like that was just after Hindenburg got elected.

    2. Law
      Stop

      Re: 13 employees and no cash flow

      He's not buying it for the staff, he's buying it for the user base.

      1. Anonymous Coward
        Anonymous Coward

        Re: 13 employees and no cash flow

        "He's not buying it for the staff, he's buying it for the user base."

        Hes still a mug.

        I have worked for a few small businesses with more staff and no doubt more turnover. If someone would have gone into any of my bosses office and slapped £10 million on the table for the company they would have snapped their hands off.

        1. PhillC
          Pint

          Re: 13 employees and no cash flow

          I own the majority of a small business, with about 13 staff, and in the region of £1million turnover. Someone offers me £10million and it's a done deal!

      2. Craigness

        Re: 13 employees and no cash flow

        How many Instagram users are not also facebook users? It can't be many, surely.

      3. Anonymous Coward
        Anonymous Coward

        Re: 13 employees and no cash flow

        Yes, a user base that has no revenue stream and is probably 90% already on Facebook ;)

      4. P. Lee Silver badge
        Facepalm

        Re: 13 employees and no cash flow

        And the % overlap with his existing userbase is...?

        Well done Instagram!

    3. AndrueC Silver badge
      Joke

      Re: 13 employees and no cash flow

      They have cash flow. $1b just came into the company :D

    4. Bill Fresher
      Thumb Up

      Re: 13 employees and no cash flow

      I run a business with no employees, no cash flow, no product.

      $10bn and it's yours. Although if you're a really cool dude I might let it go for $5bn.

      1. Arfur Smiff
        Thumb Up

        Re: 13 employees and no cash flow

        Ahh, you've got a 'brand' then?

  5. NomNomNom

    conspiracy hat:

    I wonder if a plus of a photo modifying app like instragram is that it makes it easier to steganographically burn information about the camera/location into the image itself.

    1. Ru

      Wrong hat.

      People already share photos with masses of metadata embedded in them; witness the guy who got busted recently due to his iPhone storing ownership details and GPS coordinates in a photo's exif table.

      Conspiracies aren't needed when people are just plain daft.

      1. NomNomNom

        Re: Wrong hat.

        you can see and clear that embedded metadata. If it's built into the image itself then it would be harder to detect or remove.

    2. Anonymous Coward
      Anonymous Coward

      >I wonder if a plus of a photo modifying app like instragram is that it makes it easier to steganographically burn information about the camera/location into the image itself.

      Christ I hope not, they'll find me!

      I'd never used it until I saw the outrage of hipsters here after the Android release - ever since I've been uploading my own weight in LOL cats daily.

  6. Jon 49

    Say what you like about Zuckerberg...

    ... but that Mr Systrom is a heck of a negotiator!

    1. mike 32
      FAIL

      Re: Say what you like about Zuckerberg...

      Well, considering Systrom agreed for half the asking price, I'd rather have the Zuck.

      1. Steve Evans

        Re: Say what you like about Zuckerberg...

        I doubt Systrom is disappointed. $2 billion was probably his joke price, and when Zuck didn't immediately slam the phone down he must have though "hang on a second, there might be something in this... I'll go round for tea.

      2. Vladimir Plouzhnikov

        Re: Say what you like about Zuckerberg...

        On the other hand, with him paying at least 1000 times if not more the target's real value, perhaps Systrom (having just sold a bunch of nothing for a billion bucks) is a better bet...

      3. Anonymous Coward
        Anonymous Coward

        Re: Say what you like about Zuckerberg...

        Yeah a company with hardly any revenue and 13 employees got bought for $1 billion dollars. Zuckerberg sure drives a hard bargain!!!

        I bet Systrom did the merriest jig ever jigged when he came out of that meeting. Anyone with any negotiation skills would have probably got it for less than 10 mill. How I would have loved to have seen the look of horror on the facebook board when they found out.

        Zuckerberg if you are reading this I am selling an old Ikea settee, I want 100 million for it but I know you are a tough guy to please so its yours for 50 million.

  7. Irongut

    He's a mug, bitch.

    They really saw his ugly face coming didn't they.

    1. This post has been deleted by its author

    2. Mr. Byte
      Trollface

      Not his face. His arse. Which they "hammered out on the sofa." Hope the enjoyment was mutual.

  8. Anonymous Coward
    Anonymous Coward

    Deal was hammered out on the sofa

    Now, can someone tell us what they were smoking when they hammered out the deal? And, has forensics ruled out the use of Rohypnol?

    1. dssf
      Joke

      Re: Deal was hammered out on the sofa

      Would that make it a bang-up job, or a smashing success?

      If the board seethes, then it will likely have been a cock-up

  9. Anonymous Coward
    Anonymous Coward

    Zuckerberg -the new Jobs ?

    He's not as creative perhaps. Or as sensible (Job's acquisitions were sensible).

  10. the-it-slayer
    Devil

    Go Zuckerberg!

    A few more ridiculous purchases to go and then you'll be saying bye-bye to FB when the cash stops rolling in. Another social media site to go into the graveyard.

    1. This post has been deleted by its author

  11. Borneo

    The bubble is about to burst. It will be spectacular.

    1. qwarty

      when will the bubble burst?

      Safe ground to say before end 2013.

      Any predictions when? How?

      FB IPO could be a catalyst but probably a bit early.

    2. Petrea Mitchell
      Alert

      For certain values of "about to"

      One of the big lessons of the last couple bubbles is that a bubble will persist far longer than reasonable commentators expect. So figure 2015 at minimum.

  12. Silverburn
    Facepalm

    I'm sorry...a BILLION bucks for what...? Seriously? This counts as indispensible, market-changing innovation does it?

    FFS.

    Also, this going-over-the-head of the board business will not end well either for Zucks or FB. They'll spend the next 3 months or whatever it is until IPO trying put a muzzle and a leash on him after this "stunt". Though "Stunts" are normally *a lot* cheaper than $1bn...

    1. Munchausen's proxy
      Pint

      To be fair, 'cunning stunt' is almost exactly what I think of when I see Zuckerberg mentioned.

      Almost.

  13. Germanjulian
    Stop

    Only time will tell

    As all other posters I am also inclined to say "OMG 1 billion for what"....

    but then again I did not create a successful Internet startup that is worth billions now so my comment is:

    "only time will tell is the 1 billion was worth it."

    PS: youtube!

    1. PsychicMonkey
      Thumb Down

      Re: Only time will tell

      how much money has youtube actually made though? last I saw it was costing google millions a year.

      1. Rob

        Re: Only time will tell

        Your right Google are still propping up YouTube as it is running at a loss year on year.

        They can't even get a decent ad revenue out of it compared to the amount of people using it.

        1. cordwainer 1
          Meh

          Re: Only time will tell

          There's a certain sad irony there. A lot of people voluntarily share favorite TV commercials via YouTube links; yet Google can't figure out how to monetize an actual desire to watch ads?

    2. NogginTheNog
      Happy

      PS: youtube!

      PPS: Skype!

  14. NomNomNom

    Are there any solid patents on the instagram software? It could perhaps make sense if there is a patent for post-processing photos though software on the phone.

    If not couldn't zucker & co have just paid $10 million to develop a better competing product?

    1. Destroy All Monsters Silver badge
      FAIL

      A chinese company would implement that solid patent and sell the product for valy, valy cheap.

      > patent for post-processing photos

      No

    2. Paul Bruneau

      Sure they could re-write it

      They might even be able to re-write it better. But they sure wouldn't have however many millions of users on day one like they did by buying it.

      They bought the users, not the software

      1. Ken Hagan Gold badge

        Re: Sure they could re-write it

        "They bought the users, not the software"

        He may have *thought* he was buying users, but those users haven't actually signed any legally binding contract with anyone so he really has nothing to show for his billion. It is unlikely that he'll be able to sell those users on to anyone else, so in straight accounting terms his "asset" is worth a damn sight less than he paid for it.

        At best, you could argue that he is now free to develop his own version of the same product without a risk of being sued by Instagram. However, since Instagram were demonstrably not making anything remotely resembling a billion dollars out of the invention, even triple damages wouldn't have cost as much as he has paid.

        1. dssf
          Devil

          Re: Sure they could re-write it

          What? No due-diligence? Suppose the two discussed it privately, over wine, say, or golf, 9 months ago, and decided that if certain hair-trigger events occurred, they'd continue to agree to sidle up. Then, at the trigger event, IG's pres only needed to grab the IP-producing staff 1 hour before Z shows up, and sequesters them to a board room under some other pretext to keep them from twittering the developments... until AFTER the deal was formalized.

          Still, you gotta wonder how much of the $billions would have been eaten up by attorneys and filings and such. Maybe Zuckerberg was smart on THAT "account", hahahaha....

          The lawyers are probably rummaging around trying to figure out a plane mishap or a series of never-ending document vetting to make up for being cut out, hehehehe.

    3. paulc
      Stop

      Patents?

      In a sensible world, they'd be duds... as they would be for unpatentable subject matter... yet in yankeedoodle land... sadly it appears they can just about patent anything...

  15. amanfromMars 1 Silver badge

    The elephant in the room which everyone appears to be avoiding commenting on .....?

    If the valuation of Instagram was unorthodox, so were the negotiations. No bankers or lawyers were involved in the sitting-room deal which was thrashed out between Zuckerberg and Systrom.

    Now that is progress and surely a sign that they are not needed in modern big business between principled principals.

    Not a good day for parasites, that one.

    Nice one, Mark. It would be a pleasure doing modern big business with you.

    1. defiler Silver badge

      Re: The elephant in the room which everyone appears to be avoiding commenting on .....?

      Good point. Without the bankers, accountants, lawyers and myriad other hangers-on he's probably actually got a bargain!

    2. Ian Michael Gumby Silver badge
      Boffin

      Re: The elephant in the room which everyone appears to be avoiding commenting on .....?

      Funny, but it's not his money.

      Tho parasites as ou call them actually do have a purpose...

  16. jai

    did Systrom give Zukerberg a happy finish?

    <hbo>om nom nom nom nom nom</hbo>

  17. LPF
    Thumb Up

    Those banks must be gutted..

    alll the millions in fee's that they missed out on, probally a lot cheaper than going though the board, who would have phoned up goldman sachs to allow them to get their usual pound of flesh!

  18. Mondo the Magnificent
    Devil

    It's my pot of cash bitch!

    And I waste it on any overvalued purchase I want! Bitches!

  19. Pete Spicer

    The interesting thing is that the sale was partly in shares. That means some of that 1bn figure is based on Facebook's own insane valuation, and that it's not really as ridiculous as it sounds.

    1bn cash is not the same as 1bn worth of shares in Facebook, and I don't know how the split between cash and shares, but I'd bet that the bulk of the 1bn is shares in Facebook - and after FB goes public, that 1bn may not be worth nearly as much.

    1. Ken Hagan Gold badge
      Happy

      It's worth even less now that we know Zucks is both an idiot and totally contemptuous of his board.

  20. Roland
    Alien

    Interesting, though...

    If Zuk wanted it let him get it.

    If he'd gone down the other route of "proper" negotiation, how much would a shed load of Lawyers have cost?

    The legals might have got it down to, say $TooMuch, but their resulting bill would leave the whole transaction at $WayTooMuch,ButThankYouVeryMuch,NewAstonMartin,DoYouTakeCashToAvoidTax

    A few less lawyers getting their piece of a pie that wasn't theirs to have in the first place can't be a bad thing, can it?

    Just my thoughts...

    1. Stoneshop Silver badge
      Headmaster

      Re: Interesting, though...

      "a shed load of Lawyers"

      That's the wrong collective noun. The correct one is "a gaol of lawyers", although "a wolfpack of lawyers" is usually considered not incorrect either.

  21. deadmonkey
    Stop

    Hmmm 25 comments and nobody has questioned the use of £'s in one of the paragraphs.

    I can't believe I'm more pedantic than you shower of bastards, surely?

    1. cordwainer 1
      Stop

      No...

      you're just overly US-Centric. Stating the amount in British Pounds isn't incorrect, and as long as the current conversion rate is employed and the math accurate, it doesn't matter if you express it in pesos, euros or base 8. It's still the same number.

      Some of us Murricans have noticed other countries and currencies exist :-)

  22. TeeCee Gold badge
    Facepalm

    This Zuckerberg chap.

    He doesn't want a bridge by any chance......does he?

  23. Anonymous Coward
    Anonymous Coward

    There you go

    It just shows you the value FB places on YOU the product......

    Glad I am not one of them.

    1. Dan 10

      Re: There you go

      Now *that* is really a rather good point.

      Glad I don't use either.

  24. PC1512

    Fanboy chagrin?

    "Instagram... saw a successful launch on Android, much to the chagrin of many an Apple fan."

    I keep seeing statements like this, but where are all these heartbroken "Apple fans"?

    I have an iphone, I've never actually downloaded Instagram, but it never occurred to me that it was Apple exclusive, or likely to stay that way if it was popular.. it's no secret that there are more Android handsets out there than iphones, so it seems a bit unlikely to me that anyone would be that upset or surprised by a social network expanding on to both platforms..

    This supposed upset wouldn't be a little bit projected on the part of others, would it?

    1. Darryl
      1. PC1512
        Thumb Up

        Re: Fanboy chagrin?

        Ah, I see - a total of three people on twitter didn't like it. Yes, that sounds more likely.

        1. P. Lee Silver badge
          Paris Hilton

          Re: Fanboy chagrin?

          Only three people said so, but all the echos around the blogosphere and the twittersphere made it hard to tell.

          1. Stoneshop Silver badge

            Re: Fanboy chagrin?

            "Only three people said so,"

            It used to be that there were only three people on the Internet*), and everything you**) see is just impersonation by those three. It's up to seven now, and because of the workload and the immensity of keeping track of who said what we're considering getting another two or maybe three on board, and also someone who can write us a computer program to do the administrative heavy lifting. Twitter was a gift from heaven though, we've got 99.9872% of the accounts set to auto-retweet, which cuts down tremendously on the amount of original (hah) content we have to inject there.

            *) or was that just Usenet? I'm losing track a bit

            **) you're not actually on the Internet, you just think so. You're impersonated by one of us.

        2. Stoneshop Silver badge

          "a total of three people on twitter didn't like it."

          On of which turns out to be Twitter co-founder Jack Dorsey. There's also an Apple fanboi that quit: Phil Schiller.

  25. Anonymous Coward
    Anonymous Coward

    asking price was too low!

    They should have asked for 3bln, would have been 500 mln better off. In hindsight.

    1. JDX Gold badge

      Re: asking price was too low!

      Yes because clearly he would simply have paid 50% of whatever they initially asked for.

      1. stanimir

        Re: asking price was too low!

        fetching 1b off his pocket would make you think so, no?

  26. Anonymous Coward
    Anonymous Coward

    ha ha ha

    begining of the end for f.. kbook.

    banks realy love moves like his.

    look at htc stock price.

    and they actualy generate profit from making things.

    f.. kerberg produces bullshit and NO profits.

    p. s anyone botheted to check jesus phone stock today?

    down again.

  27. Anonymous Coward
    Anonymous Coward

    People are saying it's been bought for it's 'user base' rather than the obvious fact that it doesn't make any money, but that leaves me with the question of what Facebook do with it?

    If your on instagram and you aren't on facebook I'm going to say you've got a good reason to not be on facebook ie you don't like it as a site / company ethics / data mining. In which case facebook buying instagram is going to probably mean those people will close their accounts. All the other ones who aren't bothered will already have facebook accounts, so all they are doing is buying a service for a stupid price which has duplicate users to their service.

    A mate of mine has been posting his stupid pictures taken with these filters directly onto facebook for months, so i really don't see what Zuck gains here apart from egg on his face when it all goes pop pop

  28. GeorgeTuk
    Thumb Up

    There is logic

    If they didn't pay for all the full legal bells and whistles (its only small anyway) then I bet they saved a few million on each side anyway so probably kept that as purchase price reward for a quicky deal.

    (Work in a company with acquisitions going on all the time and legal fees can be eye watering even though they are only relatively small deals of £1-2m).

    I like it, just because he didn't follow protocol everyone has a go, I bet if did it the other way and it cost a fortune the same people would also LOL.

  29. Anonymous Coward
    Anonymous Coward

    Gay crush

    if you ask me... I'd pay that much only if the founder was Cleopatra and the product was Egypt :/

  30. AlanG79
    WTF?

    No Lawyers!!

    You're all missing the point of the article, "No bankers or lawyers were involved"!! The man's clearly insane, he NEEDS to be stopped before he destroys the very fabric of our lives.

  31. Subliteratus
    Thumb Down

    Not a lawyer, but isn't this the sort of unilateral decision that gets CEOs sued by their shareholders for failure to perform due diligence?

    1. Mostly_Harmless Silver badge

      My thoughts exactly

      Ignoring the board and lack of due diligence just reinforces the impression that Zuckerberg is an arrogant little brat

    2. Keith Williams
      Devil

      CEO sued

      even after the IPO, F***berg will be the largest/controlling shareholder( over 50%), so the board will do whatever he wants or it will be replaced. and if the majority of the shareholder wants something, he gets it.

  32. samlebon23

    Suckerberg should start counting from 1 to 1 000 000 000 000, with a slow pace. That way he will learn the value of a billion dollars.

  33. Andy Watt
    FAIL

    Who's the dumb f*** now?

    No board or banks involved, deal made in a living room... panicking much, Zuckerberg? Facebook should concentrate on making a mobile client that doesn't duck balls instead of trying to buy a popular mobile client which does one job, simply.

    BTW the simplicity of apps like Instagram shouldn't be laughed at - that's the whole bloody point, who wants full Photoshop in their bloody pocket? See something memorable, snap, post-process with a little bit of nostalgic flair, post on web.

    So sneering at it only shows the immediacy of sharing that the mobile web can bring has passed some people by...

  34. Ian Michael Gumby Silver badge
    Devil

    Uhmmm

    I think that there's a couple of things...

    1) By not telling the board, he's opened himself and the company up to a shareholder lawsuit.

    2) Its not an all cash deal. (How much is based on Facebook Stock?)

    1. Anonymous Coward
      Anonymous Coward

      Re: Uhmmm

      Last time I heard Zuck still owns >60% of the stock. Majority owner and given a huge portion of the deal is based on Facebook stock which may be worthless after IPO...

      They have a $100bn valuation so this is a 1% bet and opportunity to get into a new market.

      1. Ian Michael Gumby Silver badge
        Devil

        Re: Uhmmm

        I believe we are still in pre IPO so the 100 billion dollar valuation is noise.

        But still the other 40-50% is owned by investors and Zuckerburg has a fiduciary responsibility especially in light of his desire to cash out. Why else is he taking the company public?

        Anyone purchasing shares in FB after this stunt probably bought shares in groupon.

  35. Pooka

    Ok - odd question (never used Instagram or whatever it's called but....) who owns the rights to the photos? I vaguely remember Pintrest own all the photos on their services (it's in the T&Cs, I can go find a posting on it from somewhere....)

    Did Zuckerface just blow $1b on all the pictures?

  36. verdox
    Holmes

    Not one of you have understood why he did this, for 1bn he has got direct access into an application that integrates fully into his competitors social networks, duh??? it was worth every penny.

  37. Anonymous Coward
    Anonymous Coward

    foil hat

    Billion is nothing to z man. If a government said it was going to populate a DB on every detail of everyone on earth we would all go mad.

    Z man and you do it for them. Nobody has any privacy and you get to click like on a cute dog pic .

    Its not his money so what does he care.

  38. stanimir

    There's honestly no reason to buy them at all. You could build a competing feature for a few tens of thousands that would be available on MORE platform than Instagram exists on, and do a better job.

    I'd say 4-6 months 3-4 people can create that product. There is nothing sophisticated or hard. No real time processing on the servers, image filtering is well studied too.

    I still maintain it's money laundering.

  39. Eduard Coli
    Gimp

    Why not?

    It's not his money.

    The scummier side of investment banking like venture capital and hedge funds do not care about hot air bubbles like Facebook because in the end it is the taxpayer that gets soaked.

  40. toadwarrior
    Facepalm

    If he didn't do this as a shift move to throw some money at a friend he's an absoute moron. If it were about buying out his friend's company then he'd just be acting like a prick towards the other board members.

    Instagram surely can't even have any patents given they're doing something photoshop has done for ages. Buying a userbase is stupid given it could disappear over night since instragram is just a fad at best.

  41. The Alpha Klutz

    well well

    Zuckerberg was just a dangerous lunatic all along.

    forgive me if i say i told you so HA.

  42. Seb123

    Never mind the 1 billion. I am curious about this ... "a $50m round of venture funding"

    Who the hell would fund this "business plan" in the first place. Say, guys, I have this bridge and a business plan for you to look at down in Devon.

  43. Local Group
    Thumb Down

    A Billion Dollars

    Between the worthlessness of the US dollar and the eventual worthlessness of FaceBook stock, I'd say everybody got what they deserved.

  44. Wunderbar1

    .com 2.0

    Didn't we already have this bubble?

  45. MontaraMike
    Devil

    What would it cost to hire more developers and develop an service like Instagram's? Ibet a lot less than a billion.

  46. Anonymous Coward
    Anonymous Coward

    WTF@LEE

    @lee; did you bother to do ANY research before ranting like a child who ate too many paint chips this week? Faceboook had $1.6 BILLION in revenue the first half of 2011.

    http://techcrunch.com/2011/09/07/report-facebook-revenue-was-1-6-b-in-first-half-of-2011-net-income-500m/

    I'd suggest before spouting off like a half-wit, you do at least a*LITTLE* research.

  47. Mr Ian
    Big Brother

    Was it such a silly business decision after all?

    "Mr. Andreessen, whose venture-capital firm was the second to invest in Instagram, cutting a $250,000 check before the service launched, was surprised when Mr. Systrom walked into the room about an hour into his meeting with Mr. Zuckerberg, the people said."

    I'm curious about the Facebook board's Mr Andreessen. He's apparently invested $250,000 into Instagram prior to the sale, so how much does he stand to gain now? I see that the sale is primarily Facebook stock, so wouldn't Mr Andreessen be winning quite a bit of his own stock? Stock that they're all hoping will be worth a metric fucktonne now?

    Perhaps it's possible that Mr Andreessen knew a bit more about what was going on and the $1b price paid had the secondary goal of lining the Facebook board's own pockets.

  48. Melanie Winiger
    Joke

    Cheap at the price

    If Leo Apotheker was still at HP, he would have paid 10.3 Billion for Instagram.

    Oh hang on, that was what he did for Autonomy .

  49. Melanie Winiger

    Judge for yourself - Instagram Example Photos

    Here you go:

    http://www.flickr.com/groups/instagram/

    Would you pay 1 Billion for that tool?

    1. Euchrid

      Re: Judge for yourself - Instagram Example Photos

      Sadly, the photos on that group aren’t that representative of Instagram – most of the stuff that seems to get posted these days is a damn sight worse… and don’t get me started on the ‘what’s popular now’ feed.

  50. Scott 19
    Meh

    Coin flip

    Being lucky and being intelligent are two diffrent things, luck with FB, intelligent with Instagram.

    i'll let people decide if Zuckerberg is lucky or intelligent but I will state he ain't both.

  51. John70

    A future tag line?

    It's my company, Bitch!

  52. HP Cynic

    I had never even heard of Instagram until I saw the Apple lot whining about it appearing on Android.

    If I had been one of the "Userbase" I'd probably stop using it based on the sickening greed displayed by the CEO when placing that an inflated value on my head.

    Someone mentioned money laundering - that sort of fits, along with creating a buzz and cooking the books in time for the FB IPO "Look we now include Instagram which alone is worth $1bn!!!".

  53. Anonymous Coward
    Facepalm

    Two Lips from Hamster Jam

    When this bubble bursts, how's about we follow the current trend for "retro" for the next one? I've got a couple of nice Tulips I got from B&Q at the weekend that I'd be prepared to let go for a couple of million each --> Tulpenmanie

  54. Philip Lewis
    Holmes

    Odd

    I have never used Instagram, though I seem to recall it has a product icon that looked remarkably like an old Polaroid camera (I haven't re-checked this factoid). In fact, this likeness was IIRC the reason I even bothered to look closer at what the app did. I subsequently moved on as Instagram provides no utility of any use to me. I DID, however, look at Instagram because of "the Polaroid" thingy.

    a) I wonder how many others were attracted by the Polaroid camera icon?

    b) Is there a business model somewhere in using (or is that abusing) the image of a massively well known product to gain "eyeballs" at zero cost?

    c) If the answer to (a) is "a zillion" and the answer to (b) is "Yes", then I have a great list of "images" we can poach to launch a product.

    Philip

  55. Anonymous Coward
    Anonymous Coward

    "£1bn of Facebook shares"

    I would like to know how they counted out £1bn of Facebook shares. The shares are unlisted and can't be freely traded, so how many shares are worth £1bn? I remember Facebook was widely regarded as being "worth £15bn" at one point on the basis that Microsoft had bought about 5% for £750m. The maths may be correct, but there is absolutely no way Systrom can actually go out and buy goods and services worth £1bn. Even if Microsoft decides they want to buy another slice, and Systrom would like to sell his, they won't ask him. They'll get the shares from some shadowy Melmotte figure.

    There is of course the upcoming IPO. But as above, it won't be Systrom's shares on offer, it'll be the private equity firms' and investment banks' shares. He may even be restricted from selling his shares all at once in order to keep the share price up. If Facebook becomes the next Google - i.e. has a successful IPO, the shares don't tank, are traded in sufficient volume that he can sell his "£1bn" without breaking the market, and all this goes on for long enough for him to outlast any dealing restrictions, he'll be rich. If any of those things does not come to pass, he may as well have been paid in Monopoly money.

    Still, I bet he's enjoying himself as long as he doesn't think about it too much.

    1. Ian Michael Gumby Silver badge
      Boffin

      Re: "£1bn of Facebook shares"

      Even though the shares are not on the open market, they do have a set value based on GAAP.

      Or they could set an arbitrary strike price based on the valuation used in the IPO.

  56. Local Group
    WTF?

    "Zuckerberg left his board out of the loop"

    Were they ever in the loop?

  57. Mr. Byte
    Pirate

    Zuck's arse got hammered on the couch...

    and I hope he enjoyed it.

    However, he in turn "hammered" the collective arses of the lawyers and other parasites that usually flock like vultures around these deals so I say good on him for that.

    As for "Shareholders Suits" etc, ummm..no. FB is private still, sorry.

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