Instagram and the bubbles…

by Pedro

Yesterday I was talking with a friend of mine about the internet bubble.

Is there a bubble? What’s causing it? What effects of it are you seeing? Why do you think it’s a bubble?

Obviously the topic came to the conversation because of Instagram… There’s nothing more spoken of these days than the grand acquisition by Facebook. And we were coming around some of the same questions that are being formulated by many:

Is Instagram worth that truck filled with money? Do you know they don’t even have a business model? At least one everybody can see?

What the hell does FB wants Instagram for? Is it for the mobile? Is it just to keep it out of someone else’s hands?

And we discussed lots of other deals done or not done, that changed or should have changed the internet, the way we do businesses, and our world as we know it. And how many of them didn’t.

And we kept discussing if people were once again looking at the internet and all “net related” businesses as the new Nirvana. And wether internet traffic or “web” traffic was being over considered and over evaluated.

And hence came the question:

It’s all about marketing, commercials and advertising. – my friend said, and continued – For the past decade or so, commercial money is ruling the world. Brands make products and want to sell them. To do so they need to advertise. And they look for the best place to do it, where the most people are. And that’s the internet. Therefore, whatever the bubble is – and he didn’t understand the Instagram acquisition – , it won’t affect the ad industry or the internet businesses based on ads. Brands will have products to sell and will have to sell them to people, wherever they are. And whatever happens people will still be there (on the internet).

I don’t find it to be so straightforward. And this is my euphemism for: I don’t agree…

I think there’s definitely a bubble. Although I think the bubble is exactly because / around / with the commercial / advertising industry. And therefore, yes, I think when the bubble bursts, it will definitely explode on the hands of all those who where solely basing their business on the ads and commercial strategy.

The free strategy, which was so much in vogue on the internet in the past few years, might be good for the few successful ones. But it’s not the solution as a whole for the content producers around the world. The concept that I can offer whatever product I have, and in return I’ll have millions of users doesn’t strike me. And that I can “distill” those millions of users in dollar bills and monetize my business… doesn’t look like a very good model to me. And yes, there will always be those who live on that, and can build a business on those assumptions. But the majority won’t. If you create something (a product, a content, a service) it costs you, and most of the times it has to be paid for. Directly! If nothing else, and if you can’t sell your product to anyone, maybe that’s a clue your product is not that good after all… I’m not saying you have to charge for everything. I’m not saying some free goods cannot be the lure for other stuff your selling. That’s different than just offering everything for the sake of the number of users…

Yes, there are great examples of some who succeeded doing the opposite… Yes, Alexander Magnum conquered half the world, and look at what happened to most of those who tried to do the same after him…

Although there are many critiques to the free model these days, one can still found several examples of businesses gurus making the apology of these model. And many of the over evaluated social networks or pseudo networks are being built (and financed) on this assumption: if you have a large base of people following you, you can “sell” those numbers to ad companies and that will monetize your project.

I have my doubts… but then again, what do I know about this, right?

What do you think? Let me know…

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