Business leaders make thousands of decisions each year, and sometimes, a single decision can have a powerful far reaching impact. In the book, The Greatest Business Decisions of All Time, Verne Harnish explores those “black swan” decisions that brought great success at companies like Zappos, Intel, Tata, Toyota and many others.
The greatest business decision
Facebook bought photo and video sharing app Instagram for $1 billion cash & stock in 2012 which now, has a net worth of $100 billion.
When Facebook founder Mark Zuckerberg decided to buy Instagram, people thought that it was an insane decision to spend $1b for a new photo-sharing app like Instagram which had only 13 employees and zero revenue.
Instagram was developed by Kevin Systrom and Mike Krieger in 2010. It was first launched on iOS. It got 1 million users within 2 months and 10 million within 1 year after launching.
Later, it was introduced for the android phone in 2012. Unsurprisingly, it had been downloaded 1 million times less than 24 hours after launching for android which proved that Instagram was gaining popularity among smartphone users.
So, Facebook CEO Mark foresaw the importance of Instagram to dominate the social media space in the near future.
That's the reason he gave a lucrative offer to Instagram owners to sell at 2012 and eventually they accepted the offer.
Facebook tried the same strategy to take over by purchasing Instagram's present competitor Snapchat in 2013 and offered $3 billion, but Snapchat co-founder & CEO Even Spiegel rejected the offer because he did not have any interest in short term gain.
Snapchat and Instagram are quite popular among teenagers now. At present Instagram has 500 million and Snapchat has 190 million daily active users.
So, Facebook would not be able to compete with the multimedia messaging app Snapchat by attracting particular teenage age-group without Instagram.
Whatsoever, Instagram has 1 billion registered users right now. Moreover, it added $8- 9 billion Facebook's revenue in 2018 and it is projected by technical analysts that revenue of Facebook driven by Instagram will reach $14 billion by the end of 2019.
Therefore, undoubtedly the acquisition of Instagram was not only a smart business move by Facebook but also the greatest business decision of all time. Overall, It was a huge gain for both Mark and Facebook altogether.