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Instagram could struggle to turn a profit

Eve Troeh Apr 10, 2012

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.

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