What Instagram’s $1 Billion Windfall Says About Innovation, Inequality

Photograph by Phillip Toledano/Trunk Archive

Instagram’s billion-dollar price tag, for some, puts an unbelievable number on the fast-inflating valuations for software makers.

Facebook’s $1 billion purchase of Instagram has prompted much meditation on whether we’re seeing another Internet bubble.

Bloomberg View columnist Clive Crook meditates on something else: how the deal is a reflection of the forces of globalization and information technology, which have “multiplied the opportunities and grown the prize exponentially.”

Crook writes:

Thanks to the Internet’s astonishing reach, a nifty product that required next to no labor and comparatively little capital quickly went from nowhere to tens of millions of users. The idea was valued at $1 billion even before there was a revenue model to support it, and who’s to say that’s too much?

He added:

“A good day for rewards to innovation. Not such a good day for income inequality — though, come to think of it, Mark Zuckerberg could say he’s spreading the wealth around.”

Instagram’s billion-dollar price tag, for some, puts an unbelievable number on the fast-inflating valuations for software makers. Unbelievable, until you consider that, according to the Wall Street Journal, Instagram Chief Executive Kevin Systrom initially demanded $2 billion.

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