Facebook's acquisition

Eliot Bustillos Sandoval | A01700479

 INTRODUCTION

In April 2012, Facebook, the social network giant, was

about to merge with Instagram, an online photo-
sharing platform that employed only 13 people and
had not yet generated revenue. Considering that other
services like Google and Twitter were also interested in
Instagram, Zuckerberg had to act quickly and
complete the merger before the IPO in May 2012.
About
Facebook
Facebook is a social networking platform.
It allows its users to create a personal profile,
add other users as friends and communicate
with them by messaging, uploading photos
and sharing personal statuses.
SECOND MOST-VIEWED WEBSITE
Prior to its announced Initial Public Offering for May
2012, Facebook was the second most visited website in
the world after google.com, had around 3200
employees and close to 900 million users.
ADVERTISING STRATEGY
After recognizing the large potential Facebook had in
advertising, it introduced a strategy which allowed
personalized advertisement for companies to directly
target their core customers, based on contents
members liked or shared in Facebook.
About THE IDEA BEHIND INSTAGRAM
The idea behind Instagram was quite simple: It should

Instagram
provide an easy and quick way for its users to add
filters to their photos and share the photos on an
online platform.

Instagram is a photo-sharing platform that

enables its users to take pictures, add filters EXPONENTIAL GROWTH
to them and share them online. Not even three months after the launch of the app it
had 1 million users, in June 2011 5 million and in April
2012 already 30 million.
Why making
the deal?
With barely any revenue from mobile devices,
Facebook risked being usurped by Twitter and
Instagram. Facebook's purchase of Instagram
would show investors that it was serious about
dominating the smartphone ecosystem.
Instagram Financials

$500M VALUATION NO REVENUE ONLY 13 EMPLOYEES

Instagram was valued at $500 Instagram didn't have any revenue Despite the impressive growth in
million at the time of its acquisition, and was financed entirely through users, the company only required of
had 30 million users and was venture capital. 13 full-time employees to make it
growing at an impressive speed. happen.
Facebook Financials
$3.7B REVENUE IN 2011
From the founding of Facebook in
2004, revenues have risen
continuously to $ 3.7 billion of
revenue in 2011. From these $ 3.7
billion in revenues, $ 3.1 billion were
generated by advertisements.
$100B VALUATION IPO
On May 18, 2012, Facebook became
the first U.S. company to go public
at an initial valuation topping $100
billion, kicking off a wave of Silicon
Valley IPOs for the then-new
category of “unicorn” startups.
GROWTH FOCUS
In order to fulfill Facebook's
advertisement business model, it
was of great importance to find a
way to get as many users as
possible. Even though Instagram
didn't make any money to back the
investment, they had the users
Facebook needed.
What
happened
after the
acquisition? 30M 1Bn
A SUCCESS active users active users
Facebook's total userbase grew
exponentially, integrating their
business model into Instagram's
platform and capitalizing their
userbase.
 Instagram valuation

$1Bn $100Bn
dollars dollars

The Instagram acquisition is still considered one of the best acquisitions

in history, given the extraordinary return Facebook has made on it.
Bibliography

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