Zuckerberg’s Instagram Poker Face

Facebook founder and CEO Mark Zuckerberg apparently lives by the idea that it is better to ask forgiveness than permission. This seems to have been the case with his decision to acquire Instagram earlier this month.

Zuckerberg alerted the board of directors only hours before Facebook’s largest acquisition ever, as first reported by The Wall Street Journal. Facebook reportedly paid US$1 billion for the digital photo-sharing service, which had only launched in October 2010.

The big question is whether Zuckerberg will be able to make such maneuvers after he has to answer to shareholders and board members of a public company. Or, this deal may represent one last move in the hacker spirit that he has tried so hard to preserve with the company he founded as it heads toward its IPO.

“It speaks to the business savvy of Mark Zuckerberg,” said Scott Steinberg, head of technology consulting firm TechSavvy Global. “This isn’t about being a loose cannon as much as it is about guarding the flanks.”

Post IPO World

Even post-IPO, Facebook may look to Zuckerberg to continue to protect what he has built, but the freedom he is allowed may likely be only be as flexible as his success.

“When the IPO goes through, Mark Zuckerberg will be under the gun,” Steinberg told the E-Commerce Times. “Realistically, he will still be treated as one of the technology world’s icons. To some extent, they may give him more of a free rein; however his reputation may also work against him.”

What is likely clear is that asking forgiveness alone probably won’t cut it. Zuckerberg may have to learn to ask permission first.

“I think it is going to be harder for Zuckerberg as they become a public company,” Billy Pidgeon, principal analyst at M2 Research, told the E-Commerce Times. “He may not be able to make these Crazy Ivans. He may have to explain that his strategy and tactics are sensible going forward. However, he’s done very well, and this may give him some leeway. He is still a great innovator.”

The Facebook Image

Zuckerberg’s biggest move to date may also set the tone for how he operates in the future, post IPO. Instagram may allow the social network giant to stay relevant in an ever-changing digital world.

“I see two angles that are likely to pay off — the first is the demographics of Instagram,” said Pidgeon. “It has a younger user base, and Facebook may be trying to attract those users.”

Through no fault of its own, Facebook has been increasingly moving away from the student base, which is where its roots lie. While it began as a connection site for college and high school students, it has become a site that’s particularly attractive to boomers.

“Facebook has experienced less growth with younger users,” emphasized Pidgeon, “and Facebook may be looking at sites and services that can help it reconnect with that younger crowd.”

It may also be about image — or rather, images.

“This may be a way for Facebook to shore up the sharing of images and photos, which is already popular with the social networking site,” added Pidgeon. “Facebook may already be looking to make sure they have less competition on the sharing and exchanging of images front.”

Instagram May Light the Way

While Instagram has only been around about 18 months, the photo-sharing service became an almost overnight sensation.

“Instagram is an explosive property,” said Josh Crandall of Netpop Research. “They captured the ‘fun’ in sharing photos by adding filters. Now, the everyman is the cameraman. They have fun making art out of their snapshots.”

Instagram is also really more of a feature than a company, added Crandall, who noted that the Facebook acquisition could signal an about-face for the growth of the photo-sharing service.

“I wouldn’t be surprised if growth at Instagram declines as the capabilities are integrated more seamlessly into Facebook,” he said.

Staying Innovative

On the other hand the acquisition of Instagram may prove to the world that Facebook is still an innovator.

“As long as Facebook carries its momentum forward, Mark will be a trailblazer,” said Crandell. “Will the next generation of new users want to adopt the same social network their parents and older siblings are on or not? Whether or not Zuckerberg and the company can continue to be relevant and trusted remains to be seen.”

This also may be a way to take another player off the market — or acquire companies that integrate well with its own service.

“Facebook can use their war chest to buy and retain market leadership, and acquire companies that complement their portfolio,” added Steinberg. “It does look like they paid a premium for the service, but it’s hard to quantify how much the service is worth. In the grand scheme, this offers an app that is very sticky and social on mobile devices. In the long run, it could be worth its weight in gold many times over.”

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