What The Tech Pundits Don't Get About Facebook's $1B Instagram Deal

There’s nothing more profitable than having a great, well-designed product. And somehow, that point has eluded many in the tech press.

It’s been baffling and aggravating to watch the tech press gnash their teeth about Facebook’s $1 billion acquisition of Instagram, a service that lets you add old-timey filters to your camera phone pics, and share them with friends.

This thick-headed post on CNET—titled "Facebook Buys Instagram…But For What?"—is a good example of the genre. In it, the author notices that other tech pundits seem to think that Facebook bought Instagram either for users, a better mobile presence, or to squash an upstart competitor. And then, she procedes to torch each one of these straw men. Instagram’s users and mobile mojo don’t mean anything, because they’re not monetized. As for competitors, the writer, in essence, says, "Who cares about filters? I bet most people don’t." Case closed! This Instagram thing is the worst idea in the world, the symbol of a bubble in the making. As if there were no other reasons for Facebook’s move.

But they do exist, and they have everything to do with design and product development.

In our recent coverage of Facebook, one thing is clear: The company views itself above all as a design-driven company. You can hate them for their actual designs—given all their talent, it really is surprising that Facebook isn’t better than it is. But they do think of themselves as user-minded and hyper-focused on product improvement. Therefore, you have to look at their purchase of Instagram through the lens of: How does Facebook think Instagram will improve their product. If you fancy yourself a great product company in the vein of Apple, that’s your lens, always.

Instant artiness, thanks to Instagram

Solving A Basic Problem Of Digital Life

From that viewpoint, Instagram’s accomplishments start looking pretty impressive. Consider these two competing facts about social-networking and picture taking:

  1. People take tons of pictures on their smartphones. But almost none of that content gets shared.
  2. The thing we all love most on the Internet is seeing other people’s pictures.

Instagram stepped into the gap. They managed to get people to share more of exactly what their friends want. And they did it simply by providing filters that allow people to turn any crappy old camera-phone pic into something resembling a snapshot by William Eggelston. In other words, Instagram is tapping creative instincts while eliminating the effort required to create something good. They’re satisfying our social-curiosity with pictures, helping us grab hold of fleeting moments that we might never share otherwise. They’re tapping into user emotions, which is probably the highest-aim of any smart company today.

Moreover, by allowing users to feel as if they’ve created something worth sharing, Instagram is helping users create an image of themselves as they’d like to be seen. They’ve turned the act of picture taking into a performance, whose message is: Look how cool my life is. Wasn’t that what Facebook did at one point, with all those Like pages and interests? But when was the last time you looked at Facebook and said, 'Wow, this person seems really cool?" Through dull designs and a straight-jacketed experience, the ability to convey who you are has leeched out of Facebook. Timeline was an attempt to solve that problem, but it’s not a magic bullet. Robert Fabricant, of Frog, just put that point to Inc. quite well:

I think Facebook is getting a little nervous about Pinterest, for instance. There is a new generation of meaningful social networks that are all about personal identity curation. Like Pinterest, Instagram understands that the future is photo-driven, and that those photos are about style and moments. Facebook is playing catch-up. It can either become this fundamental layer, the glue that holds this world together, or they can start creating better environments for users across the board.

I’ll bet that Instagram’s ultimate appeal to Facebook had a lot to do with the app’s road map—what features it would soon have and how it would evolve. Facebook, with an eye towards product improvement, would have seen all those changes with an eye towards how that road map could influence its own.

The Cracks Around The Edges

We’re now at a point where tech features aren’t all that interesting (even if the tech journalists only seem to write about them). When it comes time to buy an iPad 3, most people don’t care how fast it is; instead, they judge it by how fun it is to use. Features don’t matter nearly as much as user-experience. And here’s one stunning metric about how much users love Instagram: The app has a 5-star rating in the app store, on 70,000 votes. Have you ever seen a rating that high?

Tres, tres cool. Thanks to lots of filters.

That says great things about what Instagram has done so far. But the real question is how it will evolve, and how it could improve Facebook’s core product. Again, as Fabricant says, "There are so many possibilities for how Facebook could use Instagram. It’s not hard to imagine how good it could be. Then again, you never know."

The app is great because it is in such a simple stage in its development. It’s still not clear to me that they can improve that experience while dealing with the inevitable complexity that comes with scale—and there are worrying signs that Instagram won’t be able to do it, including clunky sharing pages and fussy UI details that seem far more complicated than they should be. Moreover, Facebook doesn’t have any track record of being able to absorb other companies and use them to improve their core offering. (This has always been a guiding strength at Apple, from its purchase of Steve Job’s Next operating system to, more recently, Siri, which went from being a surprise acquisition to a main marketing point with blazing speed.)

I’m not saying that the $1 billion price tag was fair: I do agree that the Valley is capable of burning money in ways that defy all common sense. Cash flow is the ultimate judge of how good a company is. But I am saying that viewing the deal simply through the lens of monetization and competing features is a good example of how tech journalists, tech investors, and even tech companies simply have no idea how to absorb design and product development into their world view. Users don’t give a crap if a service is going to make decent margins in the future. But they do care if a product is fun to use. And that is what ultimately makes a company great: It has to make great things.

Facebook doesn’t have a monetization problem. They’re making money with unbelievable speed. But they might have a product problem, and they’re dealing with that by trying to make design a part of their DNA. Still, we don’t know if they’ll be able to draw the best out of their own remarkable talent roster. Can Instagram help inspire them to do better?

[All photos by yours truly.]