Facebook Inc (NASDAQ:FB)'s April acquisition of Instagram for a billion bucks in cash and stock, is making its way through various approvals required from regulatory authorities. In an encouraging development for the merger, the Office of Fair Trading in the U.K. today, effectively cleared the deal and decided not to refer it to the Competition Commission.
With the deal looking all packed away and done, what’s the current status on its effective cost to Facebook?
It looks like everything is going Mark’s way!
Looking at it from the angle of an effective cost per user acquired, Instagram reportedly had 30 million users in April at the time of the acquisition. So Facebook Inc (NASDAQ:FB) effectively paid about $33.33 per Instagram user. Switch to July, and Instagram has all of 80 million users, a quantum jump after the acquisition. Correct my math, if need be but this means the cost per user dropped to $12.5! Surely the magic of the Zuckerberg touch. Another icing on the cake for Facebook Inc (NASDAQ:FB) – it paid for the better part of the deal in stock – and we all know what happened on that one. From the IPO price of $38 to $20.84 today, that’s quite a haircut.
Apart from the cost of the acquisition, let’s look at what Instagram itself is doing. In July it made the following announcement:
“We’re excited to announce that the Instagram community has grown to over 80 million registered users who have shared nearly 4 billion photos! Since we launched Instagram in October 2010, we’ve expanded from one platform to two, bringing Instagram to Android users as well as iOS users. As the community has grown, we’ve seen people sharing photos from all around the world, from South Korea to Bolivia, and even underwater! We’re humbled by the amazing photos from people’s lives we see every day on Instagram, and thank you for being part of this growing community. - The Instagram Team”
4 billion pics is a lot, by any standards. And each of these pics could help to earn revenue for Facebook Inc (NASDAQ:FB), if the social network’s efforts to monetize the acquisition through mobile users bear fruit.
In other reports on Valuewalk, we highlighted the possibility of Instagram making a splash on the web. This stemmed from the observation of web designer Cole Reinke, that his account on Instagram’s website included a link to “View Profile.” Though the link did not work, it was a pointer to something in the future designed for the web.
We also reported that the acquisition could help FB get a foothold in China. According to The New Yorker, the site has gained popularity from pictures of China’s cityscapes, architecture, and those infamous bridge-over-the-water scenes enhanced by Instagram’s app effects. Users can share pictures with one another, tag them, and then include search features. Instagram has this capability thanks to its relationship with the Chinese microblogging site, Sina Weibo. Users are also able to post Instagram photos to their feeds.