The eye-watering price of Instagram becomes a complete steal when you consider the rationale behind it, says Carat UK's Graeme Wood.
Thanks to Mark Zuckerberg’s seemingly bottomless pockets, Instagram, a company that has existed for considerably less than two years, is now more valuable than the entire New York Times company. The $1bn acquisition has given rise to talk of a second dotcom bubble with many commentators pointing out that Bebo, Friends Reunited and MySpace were all bought for huge sums – then offloaded for a fraction of the price.
In fact the purchase of Instagram makes complete financial sense for Facebook, which is looking to grow its value from $100bn to $500bn.
Its first growth area will be mobile, which currently accounts for around 30 per cent of page views in web-centric markets like the US and Europe – and far more in APAC and Latin America.
Future growth is set to come from mobile, but Facebook’s current mobile offering is poor. The purchase of the largest mobile-only network therefore makes a great deal of sense.
The second growth area for Facebook is in personal data, which will drive data-led advertising. The potential to add photo-recognition technology to analyse personal interest data in photographs is hugely valuable. A user who posts large volumes of photographs of snow is going to be of high value to travel and ski companies, for example. Facebook already owns the best photo recognition technology and talent available outside the military, as it acquired Polar Rose some 18 months ago.
Taken at face value the acquisition of Instagram smacks of dotcom bubble.But acquiring the technology and talent to lead two of the major growth drivers for a company aiming for a $500bn valuation in a 12-15 quarter period, for a mere $1bn, suddenly looks like a complete steal.
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IAB PwC Online Adspend Study 2011 report
Online advertising in Ireland continues to grow by double digit figures with the latest Adspend figures from IAB/PwC showing a 19.6% growth to €132m in 2011.
According to figures from Nielsen, advertising spend in other media in 2011 amounted to €897m down 4% year on year on this basis. Online now ranks number 3 in total media spend, outperforming radio, outdoor, cinema and magazines although still behind TV and press.
According to the figures, online display continues to grow with advertising on social media sites now accounting for a significant portion of the display market. Display advertising represented 38% of total online adspend in 2011. Advertising on social media sites was estimated at €5.8m according to IAB Ireland.
Search marketing, meanwhile, continues to be a trusted direct response tool for advertisers with paid-search advertising growing by an estimated 16% year on year and now represents 42% of the total 2011 online adspend. Online classifieds, however, remained flat in 2011, and as a result, its share of the online advertising market has slipped to 20%.
The figures also show that firms operating in the telecommunications, FMCG, entertainment and media sectors are the top spending advertisers in display, with telecommunications coming out on top at 12%. FMCG, entertainment and media came in joint second place with 11% of the display spend each.
Commenting on the study results Eamon Fallon, Chairman of IAB Ireland, said: "The strong performance of online advertising recorded in our 2011 Adspend Study is good news for the Irish advertising industry. IAB predicts that the growth of online adspend in 2012 is set to break the €150m barrier and see online account for 20% of total adspend".
(Pictured: Bartley O’Connor, PWC, Eamon Fallon and Suzanne McElligot, IAB)
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Irish Sites Deliver Engagement and Responsiveness
A new study of Irish websites has found that Irish Internet users are over three times as likely to trust Irish content sites compared to social networks and almost twice as likely over portal sites. This in turn has led to greater levels of engagement and responsiveness.
The study was commissioned by the Association of Online Publishers (AOP) Ireland, the industry body representing Irish digital publishing companies and was carried out by Amárach Research. The study investigated how Irish Internet users react to advertising and how their engagement impacted upon their resulting purchasing decisions based on different site types. The findings suggest that the more engaged a user is with a particular site type, the more effective the advertising contained within that particular media will be, with advertising responsiveness strongest on Irish content sites compared to social networks and portals. Some of the key engagement findings from the research report can be accessed here.
Commenting on the results, Julian Douglas, Chairman of AOP Ireland, said
"The research findings suggest that the more an audience trusts a particular type of site and the relevance of that site's content will influence the effectiveness of the advertising displayed. In other words, the environment and context drives advertising engagement, with the study illustrating that responsiveness is strongest on Irish content sites compared to social media and portals."
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