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UPDATED: Facebook’s Instagram purchase necessary to maintain sub-propositions: Ovum

UPDATED: Facebook’s Instagram purchase necessary to maintain sub-propositions: Ovum

Mark Little: Facebook needs to work on experience to maintain appeal among younger demographics

Facebook’s $US1 billion move earlier this week was necessary in ensuring that the photo-sharing sub-proposition is not neglected, according to Ovum principal analyst, Mark Little.

For those who may have missed it, Facebook’s co-founder and CEO, Mark Zuckerberg, announced that the social network had purchased the popular mobile photo-sharing app, Instagram, for $US1 billion in cash and stock.

Zuckerberg stated that the deal, which is currently pending, is part of Facebook’s ongoing initiative to enhance its photo-sharing capabilities and improve the user experience, a statement which Little appears to back.

"The timing is not entirely within Facebook's control," Little said. "Instagram's status as a 'hot' app would attract interest from Facebook's rivals, particularly Google, so it had to move quickly to dominate the negotiation or risk losing out."

As the Facebook offering continues to expand, sub-propositions, like photo-sharing, may be neglected. The usability of Facebook's mobile photo sharing does not match the experience offered by Instagram and other apps that are well integrated with both iOS and Android.

According to Little, the purchase is therefore necessary to maintain its overall offering and to continue to attract the younger demographic of users - a move similar to Facebook's Messenger release.

In commenting on the price, Little said that “$US1 billion is certainly inflated in terms of the usual revenue multiples, but this will have been driven by Facebook’s main rivals so the price tag also has an anti-competitive element driven by the cash piles of Apple ($US100bn), ($US52bn), and Google ($US45bn).”

"Given the cash pile that is surrounding Instagram is over $US200 billion, and growing fast, these funds and the fear of not owning the next tech star is responsible for the high ticket price," Little said.

Regardless, many Instagram users are unhappy with the pending purchase. The Twitterverse voiced its uproar soon after the announcement, with users looking at how to delete their accounts and photos, no doubt questioning privacy implications.


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