Zuckerberg Made Instagram Deal Alone 307
benfrog writes "According to the Wall Street Journal, Facebook's Board of Directors was all but out of the picture when Mark Zuckerberg struck the $1 billion deal to purchase Instagram, the yet-profitless photo-sharing service. From the article: 'It was a remarkably speedy three-day path to a deal for Facebook—a young company taking pains to portray itself as blue-chip ahead of its initial public offering of stock in a few weeks that could value it at up to $100 billion. Companies generally prefer to bring in ranks of lawyers and bankers to scrutinize a deal before proceeding, a process that can eat up days or weeks. Mr. Zuckerberg ditched all that. By the time Facebook's board was brought in, the deal was all but done. The board, according to one person familiar with the matter, 'Was told, not consulted.'"
and this is how... (Score:5, Insightful)
bubbles begin: when non-financiers with access to lots of money decide to make financial decisions.
Not buying into Facebook IPO (Score:5, Insightful)
Mr. Z seems to be a bit immature. Maybe this was an amazingly clever purchase, but it strikes me as a childish exercise in spending. Assuming he retains control of FB after the IPO I don't expect that the company will fare well or spend cash well. IMHO..
Re:and this is how... (Score:5, Insightful)
Ya, good thing it wasn't experienced financiers making financial decisions regarding mortgage derivatives that caused a huge housing bubble and subsequent destruction of the economy a few years ago.
Re:Read the card... (Score:5, Insightful)
CEO and Majority Shareholder, bitch.
Fixed that for you.
Re:I'm confused (Score:5, Insightful)
Actually,
Negotiating mostly on his own, Mr. Zuckerberg had fielded Mr. Systrom's opening number, $2 billion
Two billion dollars for a photo sharing social network with no business model /facepalm.
Re:CEO 2.0 (Score:3, Insightful)
Re:and this is how... (Score:5, Insightful)
It started when the "cloud" stuff started happening.
So... just be careful.
Re:Was told, not consulted. (Score:5, Insightful)
It's not a bad idea, but it's a terrible implementation. It should be a textbook example of what not to do in the field of information presentation. It puts form over function, makes it difficult to read, hard to find info, and makes terrible use of screen space.
Aside from that, it's just fine.
Re:and this is how... (Score:5, Insightful)
and his company is strong at the moment
So far as we know. Hell, if the company's own board is in the dark about what's happening...
Re:Not buying into Facebook IPO (Score:5, Insightful)
Business leaders think that Zuckerberg is some kind of genius tech visionary because of the success of Facebook. That's why he gets invited to have dinner with the President, and to talk at the World Economic Forum...
There is another hypothesis: he got lucky, he happened to be in the right place, at the right time, doing the right things.
Time will tell...
Comment removed (Score:5, Insightful)
Re:and this is how... (Score:3, Insightful)
Re:and this is how... (Score:5, Insightful)
You also have something different in Cloud, in that businesses actually have a product if they're offering Cloud services, whereas dotcom companies generally did not.
Re:I'm confused (Score:5, Insightful)
Google was a research project that proved phenomenonally successful yet started out simply.
Apple was from a few hardware hackers building illegal devices in a garage in the suburbs.
You don't know where the next killer app will come from. In this case, if Instagram was the first company to do this truly correctly in the technical sense, and if Facebook wanted this technology NOW, then we're back to the same scenario as a bunch of hackers in New Mexico ready to fulfill the needs of a giant company from Armonk.
Re:I'm confused (Score:5, Insightful)
This acquisition wasn't about the technology, it was about a desirable user population interacting on something that was not Facebook.
If you're looking for a historical analogy, Yahoo buying GeoCities for billions in stock is probably a good fit.
Re:CEO 2.0 (Score:2, Insightful)
Gates & Allen were the first to offer a high level language for microcomputers.
Zuck was the 423rd person to create a social network website, he was just smart/lucky enough to target Harvard students as his initial user group.
Re:and this is how... (Score:5, Insightful)
Horseshit. The quants may have made it possible, but it was the beancounters higher up who made the decisions.
Re:Was told, not consulted. (Score:4, Insightful)
If you let random apps run on your Facebook account you get what you deserve.
Re:and this is how... (Score:5, Insightful)
Ah yes, blame the nerds. That's how it goes, right? Hackers steal your money and government secrets, nerds will shoot up your school, and they smell all funny to boot. Except it's *criminals* who will do those things, not hackers and nerds. When someone gets arrested for robbing a bank, you don't say "A construction worker held up a bank." It's no different here, and labeling them just feeds a stereotype.
And while derivatives may have been invented by quantitative analysts (quants), they're not inherently risky -- they're just a vehicle. It's the type and diversity of securities packaged in the derivatives that determines the risk. The bankers knew full well what was getting packaged and why. The quants just gave them the "how." I'm not saying the soldiers aren't responsible for the consequences of following orders, but there's plenty of blame to go around, and ultimately those in command should be (or have been) held most responsible, since they are. That is, allegedly, why they get paid the big bucks.
Re:Profitless? (Score:4, Insightful)
Sometimes the value in your product isn't in the ability to make a profit, but in the ability to damage an established market leader that has a lot of money to spend.
Re:and this is how... (Score:4, Insightful)
...receive an average return higher then 4% over a 30year period.
...that i've been building up since getting a job in 2006.
2012-2006 = six years, not thirty years. And you started investing right before the peak of the last market bubble, so why are you surprised that you haven't made very much?
Re:and this is how... (Score:5, Insightful)
We are not in another tech bubble. There are certainly isolated instances of overvaluation, but overall, there isn't a consistent pattern of it. Take Groupon for instance. It's almost certainly headed for failure, but people have pretty much already caught on to that and the stock has already receded from its IPO. In fact, it never really enjoyed a large and long stock burst that you'd expect in a bubble. Pandora is also well below its IPO. Facebook, while well overvalued at $100B in my opinion, seems to have a solid revenue and profit stream and isn't particularly indicative of a bubble (though buying Instagram at $1B certainly doesn't make me want to be an investor, long term).
I think there was some realistic fear of a tech bubble back before any of these "sexy" IPOs actually took place and people seemed overly eager for them. But with a little bit of bubble-fear from the media, people seem to have stepped back and are respecting true valuations again . . . more or less.
And yeah, Zuckerberg making a dumb (or more probably, cronyism-based) decision for his company is neither here nor there.
Re:Personal Deal (Score:5, Insightful)
I figured the same thing. At least one of Instagram's employees, Philip McAllister, was at Gowalla when it was picked up by Facebook less than 6 months ago.
That guy might be the luckiest bastard in the world, having worked for 2 tiny companies whose only significant act was getting acquired by Facebook. On the other hand, Zuckerberg could just be funneling company money to friends?
Re:and this is how... (Score:4, Insightful)
The cloud is a bubble in part BECAUSE it is a fad way of renaming existing technologies under one umbrella label.
"...in the cloud" is the new '...on the internet!' of the dotcom bubble
Comment removed (Score:5, Insightful)
Re:and this is how... (Score:5, Insightful)
The politicians, funded by the investment bankers, made it possible. It was a really bad idea to tie investment banking to retail banking in the 1920's and a bad idea today. The investment bankers created investments out of the mortgage pools and sold them off by risk (with the top being AAA). This meant that more groups could buy shoddy mortgages (some organizations required AAA investments) and get a higher return. More money flooding into the system meant pressure to make more loans (and more fees). Without any vested interest in the loans (the banks were just going to sell them anyway), oversight became lax. Once that wall was broken down between investment and retail banking in the 1990's, bubbles with traditional retail banking assets were inevitable.
I worked for a large finance company during that time (just a harmless middle manager, so don't blame me). We had all our clients money market assets in "AAA" mortgage backed securities. We made 6% and paid 0.25% return to our clients. Life was good (until it all came crashing down). So, I guess greed is what really made it possible.
Re:and this is how... (Score:4, Insightful)
Re:Was told, not consulted. (Score:5, Insightful)
If you [...] on [...] Facebook [...] you get what you deserve.
Here's a succinct version with a wider margin of safety.
Re:and this is how... (Score:4, Insightful)
Ironically, farmers would probably be the best off, if they have equipment for production and land.
What is it that gives a farmer exclusive right over such large tracts of land if not a piece of paper? One person can't reasonably be said to "occupy" tens or hundreds of hectares without the force of law behind them.
And this is before asking what they're supposed to do with unharvested crops without gasoline and/or laborers. Since they need to be harvested first, all he can do to "pay" for things is write an IOU, another piece of paper.