Question

1. The $1 billion price tag on Instagram caught many people by surprise. Did Facebook pay too much for the online photo sharing site? Was Facebook responsible in its decision making?

Answer 1

Facebook paid $ 1 billion for acquisition of Instagram and it caught many of experts by surprise because it was an aggressive bidding price in order to acquirer company which was considered at a much lower valuation by many of the other bidders but Facebook was very aggressive in order to obtain the Synergy out of the acquisition of Instagram and it did bid higher amount at it is reflecting into a higher market share as of now, this was a very good decision, but going back it may look have to outbid its all competitors by huge margin so it can be said that Facebook made a great deal of acquisition by acquiring Instagram at a price which was even very high at that point of time, but it has yielded high rate of return.

I think Facebook was responsible in its decision making because Facebook was always trying to acquire it forth Synergy benefits in longer period of time and it was not trying to acquire for valuation perspective & it was successful when it is look from a larger period of time.

Valuations of companies which are more of technological in nature are never easy and it can look expensive at times but since the model of business of Instagram and target customer of Instagram are similar to that of Facebook then it can we say that it will yield greater Synergy benefits and a larger market share for Facebook.