Did Instagram Sell To Facebook Too Early?

Answer by Marc Bodnick, Leader of Quora business & community teams, Co-Founder of Elevation Partners, on Quora,

Marc Bodnick, Co-Founder, Elevation Partners

With Twitter’s public market cap of $20+ billion and Facebook's at $100+ billion, it now seems pretty clear that:

• Instagram sold way too early and should have turned down acquisition offers and stayed independent.


• Had Instagram stayed independent, it would have had a very good shot at a Twitter or even FB-sized outcome.


• History may remember the FB/Instagram deal as the only time when a great, market-leading consumer internet company decided to sell when it didn’t have to.


• Facebook’s aggressive strategy to acquire Instagram was a masterstroke — arguably the most brilliant acquisition ever in Consumer Internet. Previously, Google's acquisition of YouTube would have held this title, but Instagram is arguably more important.

More thoughts:

Instagram has an extraordinarily strategic and valuable competitive position.

Instagram is valuable because:

• It dominates stranger-to-stranger social photos. By “stranger-to-stranger,” I mean products that connect people who don’t know each other. Tumblr is another product that people use for stranger-to-stranger photosharing.


• Given the strength of Instagram’s competitive position, had it stayed independent, it would have had a very strong opportunity to challenge Facebook in the friend-to-friend photos.

Here’s a simplified diagram of the social communications category:

So in those four quadrants, you’ve got $150B in market cap. It’s really not hard to imagine that Instagram’s ultimate opportunity was $25-50+B.

In summary:

• Near-term, Instagram is now the Twitter for photos.


• Longer-term, Instagram could have been the one credible threat to Facebook in friend-to-friend social communications.

Given its insane growth & mega-revenue prospects, Instagram’s investor valuation today could have been $10+B.

Instagram had 30 million users before the Facebook acquisition. Today, it has more than 150 million users.

And check out the revenue forecasts that one equity analyst recently projected for Instagram:

These numbers are probably inflated and on steroids (because that’s what sell-side analysts do), but you get the idea. This could have been Instagram’s income statement future, and it’s breathtaking.

Rather than sell, Instagram’s team could have had their cake and eaten it too.

Yes, yes — hindsight is 50/50. And a billion dollars is an enormous sum. But the interesting thing is that Instagram didn’t have to make a binary “hold vs. sell” decision. Instagram could have had it all:

1. Near-term liquidity for the founders plus


2. Staying independent and the opportunity to go for it.

By 2012, it was pretty standard in the venture and growth equity markets for founders of successful companies to sell some of their shares in growth investment rounds, so that they could get some liquidity and comfort and lock-in some gains on what they’ve built. I think there’s a pretty good chance that Instagram’s early investors and board members would have been totally fine with the Instagram founder team selling a significant portion of their stake in return for their continued commitment to keep building value in the company.

They could have gotten some of this liquidity in 2012 (i.e., at the ~$500mm valuation that Sequoia invested in), or waited. Had they waited (and yes this is hindsight), the company’s value would have skyrocketed, and they could have sold ~1/3 of their stake (or less) in return for as much cash.

Sell vs. stay independent: historical analogues

Over the past 10-20 years, most consumer Internet market leaders have considered acquisition offers. Here’s how I’d look at it:

Great decisions to not sell. Over the past 20 years, there were certain moments when staying independent was a great decision by the founder. The list includes: (1) Facebook not selling to Yahoo in 2006, (2) Twitter not selling to Facebook in 2008, and (3) [rumor has it] Yelp not selling to Google in 2010.

Great decisions to sell. On the other hand, there were other situations where selling the company was an awesome decision. This list includes: (1) Bebo selling to Time Warner and (2) Broadcast.com selling to Yahoo.

Tough decisions to sell. Then, there were some decisions that feel tragic — because the companies are so awesome — but you can really understand the decision. Two companies in particular come to mind:

• YouTube. I’ve heard people say that if YouTube had held on just one more year, they could have achieved a purchase price north of $5B. But YouTube apparently felt significant pressure to sell in 2006 in part because it was facing significant legal problems that represented a giant overhang on the company and represented a potentially massive and catastrophic risk. After the acquisition, Google apparently invested a huge amount of financial resources (hundreds of millions of dollars or more) settling YouTube’s legal battles with the record labels, movie studios, etc.


• Zappos. It would have been awesome if Zappos had stayed independent, and July 2009 was clearly a low-point in tech valuations versus the subsequent four years. However, Zappos was facing at least two huge hurdles when it sold: (1) the giant financial burdens of inventory that I presume were getting worse as the company grew and (2) the potential competitive threat from Amazon.

In each of these two cases, the company was very capital intensive and would probably have had to raise hundreds of millions of dollars of growth / private equity money to stay independent. In YouTube’s case, I bet that felt nearly impossible, given their lack of revenues and massive legal challenges. I’m less sure about Zappos, but I bet 2009 private equity investors would have been pretty nervous about the prospects of funding the company’s balance sheet and income statement in the face of the two threats I describe.

Instagram however, wasn’t Zappos or YouTube. Instagram wasn’t a capital-intensive business and had plenty of access to the private capital markets. In fact, the company had closed on a $50 million fundraising right before the Facebook sale.

Thanks to Jackson Mohsenin for his help thinking about the ideas in this answer and for editing help.

This question originally appeared on Quora. More questions on Initial Public Offerings:

• What happens behind the scenes when a stock has priced its IPO but they are debating what the opening trade should be?


• Why does an IPO stock like Twitter pop so much when trading starts?


• Did Facebook’s stock perform according to expectations on its first day of trading?

from Digg Top Stories http://www.forbes.com/sites/quora/2013/11/08/did-instagram-sell-to-facebook-too-early/

Dispactches From The Coming Console War

With the release of the PlayStation 4, next Friday marks the beginning of hostilities in the return of that ancient conflict, the Console Wars.

Like all the worst wars, Console Wars are long, brutal, and senseless, and yet we humans, partisan beasts by nature, cannot seem to avoid them.

This one, in which a resurgent and wrathful Sony will match its gleaming new black machine against its old foe, Microsoft and its…gleaming new black machine, promises to be the most destructive yet.

We have stared into the flames, and seen one version of the future, which runs red with blood Flamin’ Hot Cheetos.

Nov. 15, 2013, or C-Day: Sony launches its new video game console, the PlayStation 4. Buoyed by a historic swell of enthusiasm from gamers, the PS4 sells out at stores across America. Desperate gamers bivouac next to barren Walmart shelves, where they ration Gushers and share tales of glorious launch days past. The lucky pre-orderers, in basements and studio apartments the world over, chuckle smugly at news reports of the huddled masses, but fight back strange feelings of emptiness when they realize that they have nothing to play, really.

Nov. 22, 2013, or C-Day, Part Two: Microsoft launches its new video game console, the Xbox One. Launch day is marred when lined-up customers in major cities across the U.S. and the U.K. are glitter-bombed by masked gangs, robotically chanting “Play-stay-shun.” For years afterward, these operations will be referred to, in hushed terms, as “The Siege of Mallingrad.”

Those lucky enough to escape discover that the One’s voice capabilities (“Xbox: On”; “Xbox: Watch Television”) immediately suggest a new form of humor: “Xboxing.” Examples include “Xbox: Go Fuck Yourself,” “Husband: Wash Dishes,” and “Dog: Eat My Homework.”

Dec. 28, 2013, or The Great Dongtroversy : Elizabeth Shecter, a 53-year-old Ohio mother of two, notices while dancing with her fully clothed family in front of their new Xbox One that she can see quite clearly her husband’s, her son’s, and her daughter’s boyfriend’s penises on their 60-inch flat-screen television. Scandalized, she calls the local news, which coins the phrase “The Great Dongtroversy” in a segment that goes viral.

“Xbone”, an early nickname for the console, takes on new meaning.

Microsoft apologizes and releases a mandatory “no-dong” patch, which uses smart technology to identify all dongs and turn them into cartoon ice cream cones.

Feb. 14, 2013, or the Valenteen’s Day Assacre: Alarmed parents realize that their teenage children are using the PlayStation 4’s dedicated “Share” button, in concert with the PlayStation Eye camera, to send each other explicit videos in honor of Valentine’s Day. Some are mere nude twerking; others are far more graphic. Microsoft uses this opportunity to promote its family-friendly, pan-living room feature set: Xbox One, now dong-free, is the game system that families can enjoy together (read: spy on each other). In combination with the early March release of the Xbox One-exclusive megahit Titanfall, Sony’s early momentum in the war erodes.

Oct. 2, 2014, or the Low Din of Mild Inconvenience: Approximately 10 months after the release of the Xbox One, a not-insignificant percentage of owners report a barely audible hum from their machines. It is first compared to the sound of a laptop, then a dishwasher, then a Pantera concert. Users begin complaining of headaches and fatigue, and blame it on the noisy console.

It immediately becomes one of the major civil rights issues of our time. Reddit crashes under the traffic strain. Change.org becomes the most trafficked site on the internet. ThinkGeek begins selling PlayStation 4s under the mock title “Xbox One Silencer”. Sony releases propaganda posters about human rights conditions on “the other side.”

Nov. 21, 2014, or the PSeNsive: With a single word, “LoL,” Gears of War creator Cliffy B changes console history. That acronym, written in a tweet with a picture attached of an error message (“PlayStation Network is currently down”), gives voice to millions of gamers outraged by short and infrequent service interruptions. Retweeted over 500,000 times, “LoL” becomes a rallying cry for Xbox One partisans in ubiquitous schoolyard skirmishes.

January 2014–December 2014, or The Faceworn Folly: In-house, top-secret R+D labs at both Microsoft and Sony work grueling and frantic hours in a bid to create virtual-reality peripherals for the 2016 Christmas season. Rumors spread: Sony is draining money from its profitable Japanese life insurance concern to fuel its VR program; Microsoft’s headset is so convincing, several testers experience complete psychological dissolution; Sony’s facility is underwater.

An internal Nintendo intelligence report bearing the title Virtual Reality: Those Who Don’t Learn From the Past Are Doomed to Repeat It surfaces on VGLeaks.com. Microsoft, Sony, and an imminent-to-market Oculus prepare litigation.

Then the Rift, like the Virtual Boy before it, proves a total consumer dud. Microsoft and Sony both kill their secret programs and try, with limited success, to conceal the evidence, as well as their lawsuits. Thereafter, old men refer to head-worn VR as “The Graveyard of Empires.”

November 2015–March 2016, or the Long Winter: A lackluster holiday season featuring almost no exclusive titles for either console sends millions of gamers in each camp into an existential malaise. What is the point of fighting for our console? they ask themselves. What is the point of gaming at all? Sony and Microsoft retrench, and each independently decide to rerelease its consoles in bright, limited-edition colors. Morale immediately lifts.

Oct. 13, 2016, or The Battle of the Somme Really Big Games Finally: Three years after the start of hostilities, fans fight the most infamous and ferocious battle of the Console War. On the same day, Naughty Dog releases This Time It’s Really the Last of US on PS4, and Epic releases Gears of War 5: A Lion in Winter for Xbox One. Mobs burn effigies of Marcus Fenix and that dude from The Last of Us in fetid basements. Brothers fight brothers. Parents find the limits of the timeout stretched to the breaking.

April 2017, or the Kyoto Double Cross: A Nintendo triumvirate comprising Sartoru Iwata, Shigeru Miyamoto, and Reggie Fils-Aime receive at their high command in the ancient city of Kyoto leaders from Microsoft and Sony. For years, Nintendo has claimed a Swiss neutrality in the Console War, and yet its role has in reality been closer to France in the American Revolution: It has encouraged laid off employees, following weak sales of the Wii U, to move to Remond to work on Kinectimals.

The pretext for the meeting: peace negotiations. And yet, in a brilliant and spiteful tactical maneuver, Nintendo has only invited the leaders to its headquarters so that it can announce it has signed a deal with Apple to license Mario, Zelda, and Metroid games to iOS. Miyamoto-san’s impish grin reads as pure evil.

Chaos reigns.

October 2019–December 2019, or The Draft: Three years into the first Cruz administration, six years after C-Day, the Console War reaches its peak, by sales (just like the previous one). Casual and occasional gamers are finally able to justify the purchase of the “next” generation, as prices have come down to $199 for a new PS4 or Xbox One. While, as a consequence, more and more “soldiers” are being conscripted into each “army,” the new, less-invested console owners have the effect of diluting the hatred on each side. Fewer soldiers know why they began fighting in the first place. Many were lost to college, others to the twin discoveries of sex and marijuana

Burnt out gamers from both sides put down their controllers and come together to form a social movement, called Gamers Care. While GC starts out as a peace movement, its members, outside the culture of gaming for the first time in their lives, come to realize that games are actually problematic in ways outside of the console war. The men of Gamers Care, in a landmark series of Reddit posts, break the news to the world that games are corrosively violent, sexist, and insultingly repetitive from year to year.

Gamers Care go on to discover the pleasures of older art forms, such as reading, and inaugurate weekly “Book Clans” in which members take turn suggesting a book for group discussion “raids”.

The most radical Gamers Care members splinter into a new type of full-body gaming, called sports.

Jan. 1, 2020, or The #YOLO Conference: Microsoft and Sony executives meet and agree to end hostilities, in a peace deal brokered by Tim Cook and Gabe Newell. It’s a lasting peace, but even at #YOLO, the seeds of a new and more durable hatred are sewn.

Aware of a looming threat in the form of Steam’s increasingly polished living room consoles, and Apple’s increasingly powerful cable boxes with App Store access, Microsoft and Sony sign a secret non-aggression and profit-sharing deal, agreeing that their mutual survival in the face of these new ideologies is more important than their history of conflict.

All parties to the #YOLO Conference agree that such wanton destruction and disregard for human dignity can never happen again. In honor of those lost to the Console War, the great powers erect a single monument, devastating in its simplicity:

And yet, days later, the Console Cold War begins.

Check out more articles on BuzzFeed.com!

from Digg Top Stories http://www.buzzfeed.com/josephbernstein/dispatches-from-the-coming-console-war-2013-2020

Military Brass Worried That Troops Are Getting Bored Without Wars

From Here To Paternity

Which Of The 11 American Nations Do You Live In?

Red states and blue states? Flyover country and the coasts? How simplistic. Colin Woodard, a reporter at the Portland Press Herald and author of several books, says North America can be broken neatly into 11 separate nation-states, where dominant cultures explain our voting behaviors and attitudes toward everything from social issues to the role of government.

“The borders of my eleven American nations are reflected in many different types of maps — including maps showing the distribution of linguistic dialects, the spread of cultural artifacts, the prevalence of different religious denominations, and the county-by-county breakdown of voting in virtually every hotly contested presidential race in our history,” Woodard writes in the Fall 2013 issue of Tufts University’s alumni magazine. “Our continent’s famed mobility has been reinforcing, not dissolving, regional differences, as people increasingly sort themselves into like-minded communities.”

Take a look at his map:

Courtesy Tufts Magazine

Want to receive GovBeat in your inbox? Sign up here for our twice-weekly newsletter!

Woodard lays out his map in the new book “American Nations: A History of the Eleven Rival Regional Cultures of North America.” Here’s how he breaks down the continent:

Yankeedom: Founded by Puritans, residents in Northeastern states and the industrial Midwest tend to be more comfortable with government regulation. They value education and the common good more than other regions.

New Netherland: The Netherlands was the most sophisticated society in the Western world when New York was founded, Woodard writes, so it’s no wonder that the region has been a hub of global commerce. It’s also the region most accepting of historically persecuted populations.

The Midlands: Stretching from Quaker territory west through Iowa and into more populated areas of the Midwest, the Midlands are “pluralistic and organized around the middle class.” Government intrusion is unwelcome, and ethnic and ideological purity isn’t a priority.

Tidewater: The coastal regions in the English colonies of Virginia, North Carolina, Maryland and Delaware tend to respect authority and value tradition. Once the most powerful American nation, it began to decline during Westward expansion.

Greater Appalachia: Extending from West Virginia through the Great Smoky Mountains and into Northwest Texas, the descendants of Irish, English and Scottish settlers value individual liberty. Residents are “intensely suspicious of lowland aristocrats and Yankee social engineers.”

Deep South: Dixie still traces its roots to the caste system established by masters who tried to duplicate West Indies-style slave society, Woodard writes. The Old South values states’ rights and local control and fights the expansion of federal powers.

El Norte: Southwest Texas and the border region is the oldest, and most linguistically different, nation in the Americas. Hard work and self-sufficiency are prized values.

The Left Coast: A hybrid, Woodard says, of Appalachian independence and Yankee utopianism loosely defined by the Pacific Ocean on one side and coastal mountain ranges like the Cascades and the Sierra Nevadas on the other. The independence and innovation required of early explorers continues to manifest in places like Silicon Valley and the tech companies around Seattle.

The Far West: The Great Plains and the Mountain West were built by industry, made necessary by harsh, sometimes inhospitable climates. Far Westerners are intensely libertarian and deeply distrustful of big institutions, whether they are railroads and monopolies or the federal government.

New France: Former French colonies in and around New Orleans and Quebec tend toward consensus and egalitarian, “among the most liberal on the continent, with unusually tolerant attitudes toward gays and people of all races and a ready acceptance of government involvement in the economy,” Woodard writes.

First Nation: The few First Nation peoples left — Native Americans who never gave up their land to white settlers — are mainly in the harshly Arctic north of Canada and Alaska. They have sovereignty over their lands, but their population is only around 300,000.

The clashes between the 11 nations play out in every way, from politics to social values. Woodard notes that states with the highest rates of violent deaths are in the Deep South, Tidewater and Greater Appalachia, regions that value independence and self-sufficiency. States with lower rates of violent deaths are in Yankeedom, New Netherland and the Midlands, where government intervention is viewed with less skepticism.

States in the Deep South are much more likely to have stand-your-ground laws than states in the northern “nations.” And more than 95 percent of executions in the United States since 1976 happened in the Deep South, Greater Appalachia, Tidewater and the Far West. States in Yankeedom and New Netherland have executed a collective total of just one person.

That doesn’t bode well for gun control advocates, Woodard concludes: “With such sharp regional differences, the idea that the United States would ever reach consensus on any issue having to do with violence seems far-fetched. The cultural gulf between Appalachia and Yankeedom, Deep South and New Netherland is simply too large. But it’s conceivable that some new alliance could form to tip the balance.”

Take a look at his fascinating write-up here.

RELATED: 19 photos that make you appreciate America

View Photo Gallery —From redwood forests to Gulf Stream waters, workers from the U.S. Bureau of Land Management have photographed the often-remote terrain they supervise. Here are a few of the best images and descriptions from My Public Lands, the bureau’s lively Tumblr site, of the land that Woody Guthrie wrote “was made for you and me.’’

from Digg Top Stories http://www.washingtonpost.com/blogs/govbeat/wp/2013/11/08/which-of-the-11-american-nations-do-you-live-in/

Click Your Way To A Meth Empire

widgets (purity is NA )

0

0 per second (net)

0 per second (gross)

make

cash ($0 ea)

$0

$0 laundered

$0 per second

sell

You have a low chance of a DEA raid (0%)

You have a low chance of an IRS audit (0%)

Game saved 60 seconds ago

No new messages

The game has been updated! It may be wise to create a backup before refreshing.

from Digg Top Stories http://clickingbad.nullism.com/

Cosmonauts Take Olympic Torch On Its First Spacewalk

In space, no one can hear you cheer. But cosmonauts will take the Olympic torch aloft anyway, on a Saturday spacewalk from the International Space Station.

The six-hour spacewalk was already planned for maintenance purposes on the space station, says Jay Bolden of NASA's Johnson Space Center in Houston, which manages station operations. (Also see "Olympic Torch in Need of a Light.")

The Olympic Flame travels from Greece to the host country for the opening ceremonies at every Olympics. From February 7 to 23, 2014, Russia will host the Winter Games in Sochi. (See "The Sochi Olympics' Snow Problems.")

Cosmonauts Oleg Kotov and Sergei Ryazansky will secure the Olympic torch outside the station after exiting the airlocks to begin their maintenance efforts.

Taking the torch on the spacewalk was an add-on to the maintenance work that was already planned. "This is a mission of opportunity, in a sense," Bolden says. "Not a stunt for stunt's sake."

The torch will not be lit while it is aboard the International Space Station to forestall a fire hazard on the tightly confined orbiting laboratory. The torch will simply accompany the cosmonauts on the spacewalk but won't be part of their maintenance efforts, Bolden says.

"It will be perfectly safe; they are very well trained," says MIT aerospace engineer Dava Newman, an expert on spacewalks. "It will essentially be like carrying tools, which they do all the time. And it will be a good celebration of the Olympics and of the space station."

The torch should return to Earth on Sunday, according to NASA's Joshua Byerly, along with returning space station crew members Fyodor Yurchikhin of the Russian Federal Space Agency, Karen Nyberg of NASA, and Luca Parmitano of the European Space Agency. The torch will feature in the Sochi opening ceremonies on February 7, 2014.

Follow Dan Vergano on Twitter .

from Digg Top Stories http://news.nationalgeographic.com/news/2013/11/131109-olympic-torch-spacewalk-space/