The Breakdown

Explaining Southern California's economy

2 brilliant takes on the Facebook-Instagram deal

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35477 full

This is from the Financial Times's Lex. It's a miracle of concision and by the most decisive take yet on the $1-billion Facebook-Instagram deal:

Retaining its own 845 [million] active users will require Facebook constantly to add new features, as brilliant alternatives sprout up on all sides. Facebook cannot really be planning to out-innovate every geek with a dream. Nor can it promise investors that the returns from internal investment will beat returns on acquisitions, or that, once the money really starts rolling in, the temptation to spend it can be resisted. There will be many more Instagrams in the years to come.

And this is from New York Magazine. Rather longer than the Lex piece. Also rather funnier, in a cynical sort of way:

Instagram has as many employees as you can count on your fingers (if you have polydactyly) and does a sum total of one thing. It’s beloved and hip, two things Facebook is not, and plus the company is pure nerd candy. It uses open-source software named after a jazz musician (Django!); uses the language Python, which is as beloved as [Facebook language] PHP is loathed; and posts about its technical exploits over on Tumblr (which, fun fact, recently announced its 20 billionth blog post — on Twitter). Instagram does everything "right," for a value of right that matters to nerds, and it does it with one product.

That was written by Paul Ford. He goes on to delve very briefly into a factor that think unifies Facebook and Instagram, as well as all "social" media: the reliance on vast amounts of free labor to create (a) value for venture investors and (b) monumental exits, either through, oh, I don't know...$1 billion acquisitions and blockbuster IPOs (Can you say $100 billion?).

Anyone who contributes content to Facebook or even a stripped-down mobile-only service like Instagram is donating their labor. And donating it to the cause of these companies making a very small number of people incredibly rich. True, after Facebook IPOs you can buy Facebook stock. But who knows whether the stock will ever return anything like the payday that Facebook's founders, employees, and investors are getting from the IPO?

I've conducted informal surveys about this and discovered that most people:

•Don't care

•Are so delighted with Facebook/Instagram/whatever that they're happy to keep right on uploading those photos and providing those status updates and using, using, using those manifold features that keep them on the service, looking at ads

Of course, this is a new paradigm, a new business model: to monetize the free labor of literally millions. We'll see if people wise up. But until then, we can sit back and enjoy the spectacle of Facebook minting perhaps many more overnight multi-millionaires. 

Follow Matthew DeBord and the DeBord Report on Twitter.

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