Instagram could struggle to turn a profit

In this photo illustration, an Instagram photo of the Facebook website app is seen on an Apple iPhone on April 9, 2012 in New York City. Facebook Inc. is acquiring photo-sharing app Instagram for approx. $1 billion.

David Brancaccio: Facebook is buying a little firm that that's makes a system to easily send photos via mobile phone. It's paying a billion dollars -- yes, a lot of money here. But the purchase of Instagram is about more than just an app. It's about 30 million users -- and, some say, the future of social networking and the Internet.

Marketplace's Eve Troeh reports.


Eve Troeh: There are handfuls of apps that do the same thing as Instagram: Add artsy filters to your cell phone pics and let you share them online. No one's made money at it, and Instagram is hardly a major digital player.

Porter Bibb: It has 13 employees and no revenue.

Porter Bibb with MediaTech Capital Partners.

Bibb: Could Facebook have built what Instagram is for less than a billion dollars, an the answer is obviously he could.

"He" being Facebook founder Mark Zuckerberg. His site has a lot -- most, probably -- of the photos you've downloaded from your digital camera. Most of the snapshots from your phone? Probably not on your Facebook. Guess where those are.

Mark Evans: Instagram was kicking its butt on photo sharing.

Startup consultant Mark Evans. He says Facebook isn't going to do anything creepy with your Instagrams...it just wants a foot in the door to the mobile web. And that's very different than the old school Internet.

Evans: On the mobile web, there's a lot of consumption going on. Consumption of information and images and video. You know you don't create much content, like I wouldn't write a blog post on my iPhone.

Or, why peck out a Facebook update that says you're getting coffee, when you can just as easily shoot, share and tag a cool photo of your caramel latte.

Plus, photos are "sticky" says Internet researcher Ashkan Soltani. We look at them for a long time, over and over again.

Ashkan Soltani: A prolonged engagement with users which I think Facebook is trying to go for in order to monetize.

Because if ads appear anywhere around your photos -- on Facebook or Instagram -- chances are you'll look at those longer, too.

I'm Eve Troeh for Marketplace.

About the author

Eve Troeh is News Director at WWNO-FM in New Orleans, La., helping build the first public radio news department in the station’s 40-year history. She reported for the Marketplace Sustainability Desk from 2010 to 2013.

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