Instagram: Facebook spends $28.57 35M times

by / Tuesday, 17 April 2012 / Published in Experience Design, Social Media, Strategy, Usability
I’ve $30 on my mind. $28.57 to be exact. This is the per user price that Facebook paid for Instagram last week based on Facebook’s $1B offer and Instagram’s 35M users. In my favorite article about the acquisition Andy Baio of Wired (my ten year-old self hopes he’s related to Scott Baio) breaks down the cost per user of thirty notable internet acquisitions over the last ten years.

His conclusion: Instagram was a good deal. And not indicative of a bubble. See his analysis here.

Three reasons why this is awesome:

1. Cold hard facts. Baio uses a cost per acquisition model to which any marketer can relate. It makes $1B tangible. eBay paid $84.42 per PayPal user. Yahoo $111.11 per Flickr user. Google $48.53 per YouTube user. Intuit $113.33 per user. At $28.57 per Instagram user, Facebook is looking rather savvy.

If the relative data cohort was how much it costs to feed hungry children or how far to the moon Kevin Systrom’s 400M new $1 bills would reach, we’d be telling a different story. This is what I love about data – it holds rich stories.

2. $30 can get you a lot of different things. Some ways to spend $30:

15. Fifteen days of access to a San Francisco gym
14. 3.75 months of NetFlix (streaming)
13. Five round-trips over the Golden Gate bridge (cash not FastTrak)
12. Thirty $1 tips to buskers on the L subway platform in NYC
11. 37.5 clicks on a Facebook ad (based on average CPC of $.8)
10. Ten minutes of a therapy session
9. Two mixed drinks in a swanky Manhattan bar
8. Thirty songs on iTunes
7. Two days of a rental car on Priceline (if you’re lucky)
6. Ten slices at Joe’s Pizza in Greenwich Village
5. A half-an-hour massage
4. 1/19th of one Apple share (market close value = $580.13)
3. Fifteen minutes of a visual designers time (maybe)
2. A two-pack of Polaroid 600 instant film (on eBay)
1. One Instagram user (with 34,999,999 more to follow)

Multiply each item by 35M. Think Zuckerberg made the right call?

3. Instagram’s story fuels Silicon Valley/Alley dreams. Thirteen employees, fifteen months in operation, two smart founders who seem like nice guys. It makes us believe that anything is possible – recognizing that anything in this instance involves an incredibly intelligent, simple product meeting opportune market timing and adoption rates that broke all the rules.

Like any great drama this story has foils – Kodak and Hipstamatic (profitable in their own right and a new Instagram partner). A good-natured missed opportunity in Rob Abbott who declined an early chance to shape Instagram full-time. Plus plenty of envious and inspired people salivating over Instagram’s success – as well as a loud cheering section wishing them well.

I am in the cheering section. Congratulations Instagram. Congratulations indeed.

Who’s in to be next? Game on.