Market Puzzled By Facebook Buyout Of Instagram

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By Douglas A. McIntyre Published
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Facebook is rich and has money to burn. Why not spend it on odd acquisitions?

The fight over the questionable value of social networks, fueled by the upcoming IPO of Facebook, got a boost as Facebook made a billion dollar acquisition. The company it bought–Instagram– is a maker of a popular photo-sharing app for mobile phones. It seems a number of other products do the same thing. Apple’s (NASDAQ: AAPL) iPhone is set up to accommodate similar features.

But, Facebook has been sharply criticized for its lack of a model to make money on mobile devices. Some experts believe this trouble argues against a $100 billion value for the company which has 900 million users around the world. Other online firms, led by Google (NASDAQ: GOOG), make significant amounts of money with their smartphone applications. Even if Facebook wants to gain ground in the portable device business, $1 billion is a huge amount to spend for a firm which has 30 million users and next to no sales.

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.

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