By Jim McCarthy Apr 11, 2012 0 comments

Instagram: Do Not Emulate

If you’ve been away from your computer/smartphone/video game with internet connection for the last couple days, Facebook bought Instagram for a billion dollars.

To say that Instagram is overpriced is, essentially, a meaningless statement.  It’s a meaningless statement because Instagram, quite literally, has no intrinsic value.  It’s business model is, well, no business model.  There’s not even a pretense of a business model.

I’ll tell you what it does have though: an almost irresistible product that it has proven it can give away to millions and millions of people.  If you think that’s easy, you haven’t spent any time in the interactive business. And to do it this quickly at this kind of scale is, well, it’s fargin’ amazing.

But is it worth a billion dollars?  Sure, why not?

Another way of asking this question is this: what’s a billion dollars worth to Facebook?  The answer is not much.  I wouldn’t go so far as to say it’s immaterial to them, but when they see something like Instagram getting all this consumer traction, it’s not a hard thing to say “we’d rather have this incredibly popular thing that has the potential to disrupt our core business than this billion dollars we’re not doing anything with anyway.”

So I have no problem with it, in and of itself.  Kudos to the Instagram gang.  Well done!

BUT, I do have a problem with the implications for other entrepreneurs.  Having something like this happen is like handing out headshots on Hollywood Blvd. and ending up as Tom Cruise a year and a half later.  It could happen and it does happen, but just not very often, and probably not to you.  Creating an app that catches fire like Instagram did is like writing a hit song, posting it on Youtube and then becoming a huge star.  There are LOTS of people trying to do it and it almost never works.  When it does, obviously, it’s fantastic, but if you’re a serious entrepreneur, I sure wouldn’t want that to be plan A.

It’s also distorting in that investors, who, like everybody else, are subject to pressure and the whims of fashion, start wanting to invest in “the next Instagram.”  Those are the people who will be pouring lots of money down a great big hole, while all the while telling you they are about to get rich.  Maybe.  Or maybe (probably) not.

So I guess the message is just this: appreciate and admire Instagram, but do not emulate it as an entrepreneur (or an investor), unless what you really want is a lottery ticket.

Of course, the lottery’s really popular these days

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