Q: How does Instagram make money? Answered.

Kyle Baxter at Tightwind:

I don’t begrudge Instagram’s founders for selling their company. There’s nothing inherently wrong with acquiring businesses or selling one. What I think this shows, though, is what Silicon Valley’s venture capital-fueled motto—”build now, get big, and figure out how to make money later”—does to companies. It ends up meaning that getting acquired is the only viable means of continuing the business, or ending it. It means that the business isn’t long for this world.

This is sad, but true.

I get what FaceBook gains by buying Instagram: Our photos, including our location. Probably pretty valuable. I also get what Instagram’s founders get: A cool billion.

What the idealistic part of me doesn’t get: Why are people building businesses that have no chance of ever turning a profit on their own?
I recently asked this question on GigaOm:

How does Instagram make money btw? It seems everyone and their brother praises them, yet no one talks about their business model…

It seems to me that this includes most businesses out of Silicon Valley. Food for thought.

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10 comments on “Q: How does Instagram make money? Answered.

  1. Shankar says:

    Is that the reason why mark zuckerberg i his blog post says– ” we agreed to buy instagram” .. which means that instagram put itself up for sale rather than fb trying to buy IG.

  2. Nisse says:

    I don’t like this either, if it sounds too good to be true, there is usually a skeleton buried.

  3. John Edwards says:

    Maybe, instagram was never bought for was never truly $1B . Mark may have wanted to scare the hairs out of Google+ :)
    Face book already has a cool photo sharing system

  4. Shlomo Feldman says:

    ARE YOU ALL STUPID???

    Of course instagram uproached Facebook!! The reason they made instagram, was because they knew that someone like facebook would want to buy it, and they would make tons of money.

    The reason they made the company was to sell it and become rich.
    Why else would they do it?
    They weren’t even making a profit off of it.

    • scottph says:

      Yeah, we’re all stupid. Thanks for reminding us.

      Actually, you build a business to make it sustainable on it’s own…well, at least that’s how you make a good business.

      • jackiie says:

        i agreed and i really do think that signed a contract or something because instagram has about 13 employees thats what i dont understand why are they hiring more people if they are not making any money???????

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