So, Facebook came of age yesterday. No longer content with tactical acquisitions for technology or teams, it bought a potential competitor, Instagram, for a $1 billion.
Several of aspects the deal are interesting: The timing (so soon after a round of funding and the launch of Instagram’s Android app), the valuation (eye-watering) and the deal logic (why did Facebook do it?).
Commentators all over Twitter and the web are offering a wide range of opinions on all of these topics but there is one that I think they consistently misunderstand: the logic of mobile first.
As usual, Om Malik provides some astute analysis of the deal and Facebook’s motivations:
Facebook was scared shitless and knew that for first time in its life it arguably had a competitor that could not only eat its lunch, but also destroy its future prospects. Why? Because Facebook is essentially about photos, and Instagram had found and attacked Facebook’s achilles heel – mobile photo sharing.
and, again further on:
In other words, if there was any competitor that could give Zuckerberg heartburn, it was Systrom’s posse. They are growing like mad on mobile, and Facebook’s mobile platform (including its app) is mediocre at best. Why? Facebook is not a mobile-first company and they don’t think from the mobile-first perspective. Facebook’s internal ideology is that of a desktop-centric Internet company.
I suspect that Om gets the deal logic right but I’m less convinced by the overwhelming importance of being a mobile-first business.
A Problem of Cause and Effect
Instagram was getting traction (if not revenue yet) with a mobile first solution because it was solving a different problem than many people might think.
The problem with photo uploading for every site on the internet has always been the hassle of getting your photos from your digital camera to the cloud. Here is a pretty standard running order of events from 5 years ago or less:
- Take photos on your digital camera
- Transfer photos to your computer
- Edit or process photos as required
- Upload the photos to the cloud
- Tag and release them for public consumption
It’s a lot of steps and a fairly big hassle to actually get photos from your digital camera to a website to share them. Interestingly, most websites can do very little to reduce this hassle because they only control a couple of steps in the process.
Collectively, they have tried various gimmicks to make it better like creating bulk uploaders and embedding photo editing tools into the site to allow the user to avoid off-line editing.
Here’s the thing: The main source of hassle is transferring your photos twice (camera >> computer >> cloud) was unaddressed until now.
Instagram was cunning and correct in being mobile first, not because mobile first is always the right answer, but becasue it was solving a problem that was only possible with the rise of smart phones. A smart phone lets you take pictures, edit them and upload them without switching devices at all.
Obviously, other businesses are also looking to take advantage of this development as well but for whatever reason Instagram got traction. 30 million users worth of traction. Interestingly, 30 million people thought that the utility of Instagram sufficient to outweigh the network effects of just using Facebook.
Could facebook have built the same functionality? Of course but it never occurred to them as important or being a problem they needed to solve until 30 million people demonstrated it. This is the advantage of being a focussed start-up trying to solve one problem really well rather than a social networking monolith. In fact, I would argue that to be successful Instagram needed to be more than mobile first — It needed to be mobile only.
This is the nature of the problem they were solving. Think of a different problem. Sharing files between devices. Dropbox, Box and other have similarly revolutionized that market but mobile first would have never worked for them. They needed to do mobile and desktop at the same time because the files you want to share are on your desktop.
Start with the problem. Then, worry about the solution. Cause and effect. Of course, the prevalence of smartphones make mobile the answer more often than ever before.
VCs and Entrepreneurs: what is good for the goose …
If mobile first isn’t always the answer, why do smart and prominent commentators and VCs like to talk about it?
Simply because the trends are driving new opportunities to analyze and invest in. These mobile technology markets are less settled and will probably provide a disproportionate number of VC winners over the next several years.
If you are looking for technology trends to invest in, mobile first is a great bet but you have the luxury of a portfolio approach. You can play the numbers.
If you are an entreprenuer, you have one shot so, before you decide that all you need is an iphone app and a holding page on the web, best think long and hard about the actual problem you are trying to solve.