• by David Berkowitz , April 10, 2012

There’s no way you missed this week’s tech news: Facebook spent $1 billion to acquire Instagram, the mobile photo-sharing application sensation. This may be a factually accurate description, but it misses the heart of the story. What happened was, Facebook spent $1 billion to acquire a piece of itself.

Photo sharing has always been a core part of Facebook. The site was conceived as a way to rank the attractiveness of founder Mark Zuckerberg’s fellow Harvard students. By May 2007, when few marketers were paying attention to Facebook, users had uploaded 1.7 billion photos to the site. Facebook reportedly notched its 100 billionth photo sometime last summer. Last August, when Flickr notched its 6 billionth photo uploaded, reports showed Facebook users uploading 6 billion photos every two months.

There shouldn’t be any question why Facebook acquired Instagram, or why it paid so handsomely for it. Sure, Instagram’s acquisition price was more than twice what was paid for a dozen other photo-sharing startups combined over the past fifteen years. Instagram isn’t just any photo-sharing site, though. It attracted 30 million users for its iOS apps alone, before a successful Android launch just days ago.

Beyond any numbers and superlatives, what Facebook’s executives must have realized is that Instagram should never have existed. This should have been Facebook’s photo application all along. Facebook has more than 400 million mobile users, and any of them using a smartphone has to grapple with subpar photo sharing. Once Instagram fully integrated with Facebook, it became even more obvious that Facebook was far behind. As Business Insider put it, “Without photos, Facebook is toast.”

Instagram isn’t just a major source of photo sharing; it’s also a major contributor of public location-based data. Last fall, when I checked LocalResponse to research location-based services for a major quick service restaurant, Instagram trailed Twitter and rivaled Foursquare to join the top three sources. This also fits in well with Facebook’s approach, where checking into locations isn’t that important, but adding location information to status updates and content is increasingly common. Facebook even constantly recommends that users add locations to their photo albums.

By acquiring Instagram, Facebook tacitly acknowledged that it had lost its focus on what Facebook has always been about. Instagram is an app that never should have existed in the first place. One wonders what would have happened to Instagram if Facebook took its engineering resources used in creating the timeline and applied it to creating the best mobile social media experience. At least now, Facebook doesn’t need to worry about Instagram as a competitor, and the deal ensures that no one else can lay their hands on the startup. Google and Apple could both have been interesting suitors.

This acquisition once again reminds marketers how visual consumers are. Pinterest, Tumblr, and Instagram aren’t flukes; people enjoy expressing themselves via images. But Instagram has also followed Twitter’s lead in using simple hashtags to categorize images. This is crucial for organizing information right now; it’s still difficult to retrieve and search for images unless there are adequate tags and descriptions. What’s old is new again; plus ça change, plus c'est la même chose. Just about any marketer that has experimented with an Instagram campaign has relied on using a consistent hashtag for identifying relevant images.

More importantly, this should be a wake-up call for all business executives. What other companies out there are embodying and executing on what you do even better than you are? What part of your corporate DNA has been stagnating at your headquarters, and where outside of your office is that DNA mutating for the better? What do you have to do to stay true to your identity, whether through in-house development or acquisition? Mark Zuckerberg found his answer for Facebook, and proudly paid $1 billion for it. Will it take that much for you to do the same?