And just like that, Facebook has entered the spending sweepstakes. Facebook announced Monday that it has acquired Instagram, the popular photo sharing application, for a total of $1 Billion. The deal includes a combination of cash and shares of Facebook.
I will say two things. 1) That is A LOT of money. 2) Ish is getting crazy.
Two weeks ago, Zynga bought DrawSomething for $250M. Since that time, DrawSomething's user based peaked, plateaued, and although I'm not certain, I'm guessing is likely on the decline. I know I've stopped playing it. Much like I did with another Zynga game, Words With Friends. Not because I don't like Zynga (which I don't), more because the games just aren't that fun. They are cool for about 2 weeks and then it's the same crap, different day. The only way to make it more interesting is to spend money, and I'm guessing it doesn't increase the fun factor all that much.
Instagram on the other hand has been cool and relevant for over a year now. iPhone users had an exclusive little club going (the app was only available for the iPhone until it was released last week for Android). Now the user base will grow exponentially, so it appears to be a good time for Facebook to buy them out.
I just worry about all this money that is being thrown around. Spending money in Silicon Valley is nothing new. Just ask the Sequoia Capitals and Benchmark Capitals of the Valley, both of which the word successful is a major understatement.
Still, I seem to remember a time in the not too distant past when quick, fast and big deals in the Valley were commonplace. That was the late 1990's and the Tech Bubble. Have we learned from our mistakes? Doubtful. Are people still greedy? Likely. Have we officially entered Tech Bubble 2.0? Tough to say.
I will say this, you might not need to look much further than recent IPO's Groupon, Zynga, Angie’s List, LinkedIn and Pandora for your answer.