Facebook pays $1.25b to help protect its Achilles heel

Once we get over the initial shock value of the Instagram purchase by Facebook, it is much more interesting to look at the why as opposed to HOW MUCH?  Yes, Instagram was worth $20m only 14 months ago, $500m last WEEK, and now $1.25b (cash and FB stock w/ valuation $74b).  Their user growth and activity levels are growing rapidly, they just added the app to the Android platform, they are a leading photo sharing site, AND they have users interacting OUTSIDE of the Facebook network.  And that leads us to the why…

From a fundamental perspective there are four truths to consider:  1) photos are the leading activity on FB; 2) viral activity leveraging Facebook, Twitter, the mobile web and other social outlets has never been so pervasive or explosive; 3) mobile web activity will overtake desktop and laptops soon; 4) FB activity on mobile is fundamentally different and lower than on the desktop.

On the desktop FB is a platform, on mobile… just another app.  There is a HUGE difference.  On the desktop a users entire web activity and most of their time is through the FB platform.  On mobile, they are just another one of the many apps consumers use to manage their mobile lives.  In addition, the FB mobile app is cumbersome compared to others.  Instagram is fast and elegant, Twitter simple, Foursquare simple.  Yes, FB has more information and flexibility, but in a mobile world the whole point of the app is simplify.  FB is aware of their limitations on mobile and is actively pursuing a mobile phone platform strategy and in the meantime is willing to buy competitors.