I wanted to do a comparison of other companies that are likely big acquisition plays, like Instagram just was today for Facebook. As I was constructing my list, it became clear that while there are a lot of very good companies that could easily get acquired for hundreds of millions of dollars, few have the same, critical values that Instagram has. And not just to Facebook. There's really only one startup that emerges as most Instagram-like: Pinterest. All the others are battling for position as distant followers.
- Instagram: It's all about sharing photos with other people. Standalone cameras are yesterday.
- Pinterest: Also inherently social. You share interests, visually, with others.
- Instagram: Zero to 30 million users in two years isn't bad at all. There has been some talk that the Instagram team knew that their user base growth was slowing. If so, they sold at the right time.
- Pinterest: Pinterest reports 17 million users a month; it launched in March of 2010 (a few months before Instagram).
A threat to Facebook
- Instagram: While 30 million users is a small fraction of Facebook's base of nearly a billion users, those Instagram users are passionate, engaged, and performing an activity that is absolutely core to Facebook: sharing photos.
- Pinterest: Its users are doing another activity that is at the beating heart of Facebook: sharing their finds of things they like with friends. Facebook can't let that get away.
- Instagram wins in this category. It's got a winning mobile application for sharing. There are other good photo snapping apps, but few, if any, with the same effective blend of tools for both creating and sharing media from a mobile device.
- Pinterest is not yet a power player on mobile. There is an iPhone app, and the site itself works well on HTML5-equipped devices for which there is no app yet (Android, iPad), but this is one area where Pinterest lags.
It knows what you like
- Instagram, like any photo capture app, collects date and location for the photos it takes. So a service, like Facebook, can fairly easily discern what's happening in the shot even without image recognition software. Facebook can also layer in data from your social graph to figure out who else is at a location. This data could become hugely valuable for advertising.
- Pinterest users are even more valuable. They tell the site what they're interested in (home design, cars, winter fashion) and then provide links to the sources they're "pinning." This data is far more valuable, for advertisers, than Instagram's.
In most key areas, Pinterest is at least as interesting as Instagram. And in one key area -- as a marketing and advertising platform -- it blows Instagram out of the water.
Pinterest raised $27 million to peg it at a $200 million valuation. That's shy still of the $50 million that Instagram raised to loft it to its pre-acquisition value of $500 million. And while it's possible that Pinterest could turn down more money or even a big acquisition right now and go the let's-grow-revenues route, at some point this company will have an exit. If the tech bubble doesn't pop, it could well be a larger event than Instagram's acquisition. Potential acquirers include Facebook, but also Google or Amazon. (Twitter, alas, doesn't have the cash.)
For the sake of comparison, I also considered companies like Spotify, Evernote, and Dropbox as potentially the next companies to pick up the torch on huge exits. But none provide the same combination of social juice and marketing data that Instagram and Pinterest do.