Marketing Matrix: You've Made the Majors, Now Play in It

Sunday, April 29, 2012

You've Made the Majors, Now Play in It

by Todd Bailey

If you were a small startup, suddenly becoming hugely popular, would you align with a bigger brand or keep the startup momentum churning? It's somewhat akin to the decision some high school or in-college athletes face when approached by major-league teams. Do you carry on with your innocent talent or do you join the ranks of the bigger and better experienced, hoping to maintain that initial spark?

The Instagram duo played impressively, to the point the performance made Zuckerberg desire Instagram on his 'team.' Was it a good idea? Strictly thinking in monetary terms, with the deal culminating at $ 1 billion (30 percent cash, 70 in stock), it's a no-brainer question. However, there are some looming considerations.

"I hope they didn't agree to this deal because of Facebook's valuation on the secondary markets. It's still unclear whether there's a strong correlation between pricing on the secondary markets and the public market," says a former Google exec.

Facebook, expected to open its financial doors to the public next month, is estimated to value the IPO at $104 billion. The New York Times observes this number is aligned with what Facebook is trading for on the secondary market (shares are selling as high as $40).

It's understood the secondary market 'helped' Instagram execs wrap their head around the Instagram/Facebook deal. If the IPO goes as expected or better, the Instagram team could enjoy some extra benefits. If the IPO is less than grand, the proceeding sentence does an about face.

This is just another story of anxiety. There's no way to know for sure how it will all go until it all happens. What will happen with the Instagram duo? Surely, both young men could retire due to the fruits of their limited labor. Was that their original intention? Were they playing for the love of the game or for the love of the spoils of the game?

Mark Zuckerberg seems to be a player. I'm wondering when Facebook does go public, how he will act; I'm growing bored of speculation. There's no doubt a bit of 'freedom' and 'independence' is lost once a player enters bigger leagues. Zuckerberg explains the Instagram deal is more about improving the quality of Facebook than the quantity of its revenue. "We don't plan on doing many more of these, if any at all. But providing the best photo-sharing experience is one reason why so many people love Facebook, and we knew it would be worth bringing these two companies together."

Hopefully the exchange of funds goes well for all parties involved. More so, I hope all parties involved in acquisitions and IPOs, are well compensated in intrinsic value, being satisfied with their decisions.

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