Not since Google bought YouTube has an acquisition grabbed the world's attention the way Facebook's $1-billion deal to buy Instagram. And it's bound to get tongues wagging again about startup valuations shooting into the stratosphere.
“It’s unprecedented on almost any metric you look at,” said Paul Kedrosky, a senior fellow at the Kauffman Foundation.
The San Francisco startup has just 13 employees. That works out to be $76 million per employee, Kedrosky pointed out.
At the same time, Instagram had no business model, no revenue. “That's going to make some people’s eyes roll back in their heads and connect to their ears," Kedrosky said.
So why did Facebook pay so much for a photo-sharing app? As we've written in the past, Instagram was not just a photo-sharing app. Sure it made photo sharing applications for smartphones that allow users to take photos and jazz them with retro filters. But it was becoming a very powerful mobile social network that let you share the photos with friends on Instagram or on other social networks
So Instagram may not have given Facebook a run for its money, but it was sure giving Facebook a run for its popularity, and on the most important platform of all: mobile.