Back in 2012, a fresh new app, powered by a team of just 13 employees, was starting to gain popularity for its unique and innovative way to share pictures online. As this app grew rapidly amassing millions of new users a month, another fairly similar yet far more popular app took notice and acquired it to form a near stranglehold on an exploding new industry.
Today this game-changing app has over 1 billion monthly users and is the recipient of over $2 billion in annual ad spending from businesses around the globe. Its users spend 1 hour on average on the platform each day. Teens spend hours perfecting their own profiles and there are now thousands of people making a living off of this app. Its acquisition is now considered one of the biggest bargain deals in modern business history. I am of course talking about…
Instagram.
Social Media Giants
Social media has had an undeniable impact on our society and culture and no apps have brought people together more than Facebook and Instagram. These two social media titans have influenced the world around us more than we may ever know and had a surprisingly huge impact on the way we do business in 2020. Humans are inherently social creatures and Facebook and Instagram have reinforced this truth in a major way.
Facebook was created all the way back in 2004 by the legendary entrepreneur Mark Zuckerberg and it grew at an unprecedented rate while quickly crushing the original social media leader, Myspace. They were the sole leaders in the social media space in 2012 and were gearing up to go public on the New York stock exchange when they made the best business acquisition of the 21st Century.
The Acquisition
Just over one month prior to their IPO, Facebook completed the acquisition of the new, but quickly expanding picture sharing app, Instagram. At the time Instagram had just 30 million users and absolutely zero dollars in revenue. They were a free app with no established target audience, few features, and absolutely no path to profitability.
Many analysts were critical of the deal, saying that they spent $1 billion on a company that makes no money, but savvy analysts were quick to point out the potential of a social media partnership that had the attention of millions of people every minute. Facebook had already showed the upside in the online advertising industry when accumulated over $1 billion in advertising revenue in 2012, a wild 65% increase from the previous year. Social media was a booming industry with so much potential for growth thanks to the rise of online advertising. Facebook saw Instagram as they only legitimate threat to their essential monopoly of the market and quickly acquired them before the business world fully recognized how much money could be made in this space.
Impact
Today, Facebook’s $1 billion acquisition of Instagram is unanimously regarded as a steal, but it is just recently becoming apparent exactly how much of a steal it really was. The two platforms were top four for most downloads in the past decade, and are home to over 1.7 billion daily active user accounts. This huge volume of users on their platforms has paved the way for the advertisers to come pouring in to seek exposure to all these users. The two platforms combined for over $17 billion in ad revenue in quarter three of 2019 alone. The digital advertising segment increased in spending by over 20% from 2012 to 2018 as businesses took notice of the mass migration of consumers to social media platforms.
Facebook and Instagram ads are now bought consistently by all types of businesses ranging from the blue-chip Fortune 500s to small local mom and pop stores. These social media platforms have transcended the way a brand can interact with its customers by promoting creative and instantaneous feedback opportunities for growing businesses. Facebook has a near-monopoly on one of the hottest markets in business and is set to continue its dominance in the 2020s. Instagram was the only remote threat to Facebook as the top social media platform and with this acquisition, Facebook has cemented itself as an untouchable giant with over a billion loyal users and a rising stream of digital advertising revenue. You can’t put a price on the daily attention of hundreds of millions of consumers, but it certainly is worth much more than $1 billion.
Business Barrage 