The Facebook acquisition of Instagram. A Case Study

Term Paper , 2013 , 17 Pages

Business economics - Business Management, Corporate Governance

On April 9th 2012 Facebook announced its acquisition of the application Instagram for nearly $1 billion including $300 million in cash and the rest in stock. The acquisition was finalized on September 6th with an offer of $736 million. In this case study we want to examine what the reasons of Facebook were to spend such an amount of resources and especially what the acquisition means for Facebook’s long-term strategy.

We are going to tackle this research question in the following way:
1. We will introduce shortly the advertisement industry to the reader and explain what the typical common/shared strategies are for different parts of the industry (e.g. social network websites, radio, television, papers etc.)
2. Afterwards the strategy of Facebook before the acquisition will be elaborated so that a comparison can be made with the overall advertising strategy and how this made Facebook so popular.
3. The acquisition event:
3.1 First an analysis will be made of the reason behind the acquisition of Instagram (Facebook was going IPO in may or was the acquisition purely strategical for long-term ends, maybe both?)
3.2 What was the reason behind the fast and high valued acquisition? The bidding was quite high, was this for strategical purposes? (Gaining Instagram faster might mean faster “innovation/integration.”)
4. Analysis of the possible changes in the strategy of Facebook after the acquisition and application of 5D and 7D analysis.
5. Finally we will give a conclusion/evaluation about the event and make propositions of long-term strategic recommendations based on 5D and 7D analysis made in the previous section.

Table of Content

Introduction

Facebook’s History

Making Facebook a business

Instagram

The social media market environment

Bargaining Power of Customers

Competitors of Facebook
Threat of New Entrants
Threat of Substitute Products

Competitive Rivalry within the Industry

Challenges ahead

Conclusion

Literature

Exhibits

• College: KAIST College of Business
• Authors: Josua Flath (Author), Christian Lütkemeyer (Author), Samet Mercan (Author), Bui Le Dzung (Author)
• Publication Year: 2013
• Pages: 17
• Catalog Number: V275569
• ISBN (eBook): 9783656680314
• ISBN (Book): 9783656680321
• Language: German
• Tags: facebook, instagram, case, study