Instagram and the Age of Upsets

Instagram has showed us Facebook is vulnerable in a way Google never was.

Mr. Webb.

Instagram, Instagram, Instagram! Oooh fun times! OMGPOP was exciting enough, but this! So exciting! What does it mean! What does it mean! A few weeks ago I tweeted that I wanted a nice big juicy acquisition to get all excited about. Chaos! Excitement! Inspiration! Copy cats. Looks like I got my wish.

Another thing that strikes me looking at Instagram and OMGPOP, is that I think what we are seeing is that the new tech titans are vulnerable. The days of people jousting fruitlessly against the dominant tech titan—Google—are over.

Back in the day, it was so, so hard to attack Google. Many tried. All failed. Cuil and Bing gave it a shot to no avail. WolframAlpha is a different sort of animal, but it’s hard to see it making any serious inroads into Google’s domination. And while I love the new DuckDuckGo, I don’t see it making a dent.

Of course, one could argue that Facebook is the threat to Google’s search that we have all been waiting for. The thinking is that Facebook is building a social graph of people’s tastes, along with their friends. And in many cases, that information can yield a much better result than a Google search. Type “which camera should I buy” into Google, and type it into Facebook. Which gives you the better results? Google may be finally facing its first serious threat in the form of Facebook, which is exciting.

That may be. But first, how depressing is that? Facebook? After all that? They’re the answer to our prayers for a Google counterweight? Secondly, if it takes a $100 billion IPO to be the threat, then this just illustrates how invulnerable Google’s search business is.

But Zynga and Facebook? They seem more able to be toppled. It seems possible to knock them off of their throne. Two companies, OMGPOP and Instagram, came out of nowhere and became viable competitors. That’s kind of amazing. It’s amazing to me that Instagram got 30 million users in no time at all. It’s crazy that Draw Something can get 50 million downloads in 50 days. It’s mind blowing that Pinterest went from nothing to 10 million users in the blink of an eye. It’s amazing how fragile it all is. Facebook may be the first viable threat to Google, but its own market dominance is by no means assured.

Facebook seems determined to not go the way of Friendster and MySpace. Early on, that was all you heard. Why is Facebook so much better? Why won’t everyone just abandon it the way they abandoned MySpace? We’ve heard less of that as Facebook’s user numbers reached the stratosphere, which MySpace never even touched.

But there were also Facebook’s smart actions. It didn’t sell. It acquired small companies that helped them out or posed a potential threat—Gowalla, Beluga, Hot Potato, FriendFeed. It seems all too aware that its market is far less defensible than Google’s was. Seems to me that everyone learned a lesson from Twitter and Facebook: whatever it takes, don’t let these companies get anywhere near 100 million users. Buy them now before they become your main competitor. Instagram was getting too close, especially with its recent launch on the Android platform.

It’s true that Facebook seems aware that its position is vulnerable. And with this acquisition, it proves that it is not afraid to make bold moves to defend itself, much as Google did with YouTube and Zynga with OMGPOP. Yet still, it also proves that it NEEDS to defend itself. That the king can be dethroned. That a new force can come to power. That the small guy can still topple the big guy, provided he can resist the monetary temptation along the way. I think this is interesting. For me, personally, I’ve been growing tired of new social apps. I think a lot of people have. Yet the success of Draw Something and Instagram (along with Pinterest, Path, etc.) have proven that not everyone is. There is, perhaps, more latent disquiet over Facebook’s dominance than I gave credence to.

So, what’s left? Now we have Tumblr at 50 million blogs (not users), Foursquare at 20 million users or so, Pinterest at 10 million (again, crazy!) and Path, gaining two million users in two months. What will become of them? Will we witness all of our favorite apps being snapped up? Will all of the best tools be owned by two or three big companies? Will the web be conglomerated? Will the buyers be smart enough to not mess them up? Will the users just move on to the next big thing? Where is all heading? Is buying users the same as earning them? I don’t know, I don’t know. But oh what fun! I hope they all get bought for ridiculous amounts. I hope Apple buys Twitter and Netflix! I hope Baidu buys Path! I hope Google buys something I don’t use, because you know they’ll go mess it up! I hope all these companies buy companies I’m actually invested in, but I think I’m not allowed to say that. Chaos! Social upheaval! Raise the capital gains!

Oh now, I’m bringing myself down. Massive wealth disparity. The decoupling from the economy as a whole. Ugh. Then there’s the sheer size and magnitude. Instagram’s last investors literally doubled their money over the weekend. It does seem to have “bubble” written all over it, doesn’t it? I mean, I’m constantly worried about the “bubble,” as I repeatedly talk about. And a billion dollars is some pretty serious crazy money. But I admit that I am having a hard time moulding the Instagram purchase toward a bubble narrative. Facebook’s IPO is estimated to value the company at a hundred billion dollars or so. It’s really not that much money to them. Zuck’s a smart guy.

Would I buy Instagram with 1 percent of my net worth? Oh man, yes yes yes.

Rick Webb co-founded The Barbarian Group, a digital ad agency, and is now a writer and angel investor in the tech industry. Instagram and the Age of Upsets