Engagement trumps revenue

It’s been 17 months since Instagram was purchased by Facebook for just under a $1B USD. And about 18 months prior to the purchase, Instagram didn’t even exist. While the timeline from launch to acquisition is spectacular, what’s equally phenomenal is that Facebook acquired a company with zero revenue.

Sure, Facebook saw Instagram as a strategic purchase and a real threat in the mobile marketplace of eyeballs. But that’s exactly what Instagram had: engaged eyeballs. I am not speaking of mere users which are sometimes tallied by start-ups as an indicator of success (while a majority of those users only logged in once, or merely lurk). No, Instagram had true consistent engagement, and that’s what Facebook valued above revenue. Even today — a whole 35 months after Instagram was created (an eternity in Internet-years), I still use it daily as do many others.

While I wouldn’t consider the Instagram base as a whole to be a community per se, the lesson we can extract from this rags-to-riches story is that online engagement has real value, and in the land of start-ups and M&A, it can even trump revenue.

Further reading: The Money Shot