Pop goes the web

Published 10 April 2012 16:38, Updated 12 April 2012 14:58

+font -font print

OK, so it’s early in the century but I suspect the pleasant little note tweeted out yesterday morning by 28-year-old Kevin Systrom will be a strong candidate for the understatement of the decade, if not the century. Kevin (that’s how he signed off the statement) and his co-founder Mike Kreiger announced that Instagram, the company they founded in 2010, “has agreed to be acquired by Facebook” and that they “couldn’t be happier”.

Then Twitter went pop with the news.

Not because Instagram is a particularly fascinating technology – it lets you take and share old-fashioned looking photos with your smart phone and share them through various social networks – and not because there is anything really ground-breaking about the deal. Facebook is paying more or less the same per user as Google paid for YouTube in 2006, so really the past six years hasn’t counted for all that much.

Pundits just couldn’t believe that a company with a hand full of staff, the head count had been reported at some where between five and eight, could be sold for $1 billion.

There were shreaks of horror as commentators pointed out that this tiny and very young company was worth more than The New York Times with its 1150 staff, or the entire intellectual property cache contained within the recently defunct Kodak.

But these comparisons are fairly silly.

In 1976, when Kodak had a 90 per cent of the market share in the US and was so dominant it found its way into the popular lexicon as a “Kodak moment”, it was a fast-moving innovative company recognised for its capacity to churn out patents and for innovative approaches to staff development.

But that was 36 years ago and values have shifted markedly. Knowing how to make stuff is no longer at a premium because we know how to make most of the stuff we need pretty cheaply. Kodak’s intellectual property, not to mention its business model, has been superseded.

Get over it.

The New York Times business model still has some elements of value but the way we measure that value is shifting radically and although it takes 1150 staff to produce the content, it is delivered to only about 20 million people a month over the internet. That’s 7 million less than Instagram.

The five or so people who work for Instagram are able to reach 27 million people, the 1150 odd people who work for The New York Times are able to reach 20 million people.

Sure Instagram isn’t making any money but it’s overheads are kinda low and its reach is kinda high. The New York Times isn’t making any money either and the overheads ... we’ll let’s not go there.

Having pointed out that maybe there’s some sense to the payment, $1 billion is a lot of money, and it’s hard to see how Facebook will recoup the investment, unless it has done the sums on what it will cost if emerging rival Pinterest gets the jump on it the way Facebook got the jump on MySpace.

But having marched headlong into the last dotcom bubble burst, it’s time we Gen Xers handed the mantle over to our Gen Y counterparts who were, after all, not even old enough to drink in a bar when in April 2000 tech stocks began to slide.

They won’t remember it and won’t take the warnings seriously anyway, even if we could be bothered trying to tell them. Because the simple truth is, neither the internet nor social networking have been around long enough for investors to understand how to make money out of them in 10 years’ time. And in the interim they’ll all come up with lots of cool technology we can use, in the same way the last tech disaster produced a lot of affordable telecommunications technology we are now using.

So let’s just sit back and instagram each other photos of the fireworks when they happen.

Did I just coin a new verb?

Do you agree? Write and tell me your views.

Harness the power of knowledge - become a subscriber to access 20 years of BRW’s archives.