At $33 per user is Instagram a bargain? YouTube was purchased at $1.65 billion with undeclared but estimated low revenues. The cost-per-user was just north of $50.
However, we know that Google bought YouTube to develop a niche video portal. (A portal that in 2006 was demonstrating an average user time spend of fifteen minutes each day.) Online video was the new frontier and Google made YouTube one of the pillars of its advertising empire and matured the property slowly. Presently YouTube direct content and the YouTube partnership network supports the lions share on online video time spent in North America.
Instagram provides eyeballs – 30 million; however, is the application indispensable, sticky and can Facebook grow the property slowly to extract the value? Instagram’s global user base spend their time cropping and filter images to make them look upload worthy.
Acquisitions for eyeballs has not been a big win for many buyers. What is the long term content play for Facebook. Is Instagram a mature building block for Facebook or is it a pre-IPO market postioning story?