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Network effects, network markets and the fight for our data

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Instagram Sells For $1 Billion, Despite No Revenue. The technology world is abuzz over Facebook's $1 billion deal to acquire the photo-sharing app Instagram.

Instagram Sells For $1 Billion, Despite No Revenue

Two years ago Instagram didn't exist. Some reasons behind the company's meteoric rise: apps are everywhere and Instragram took advantage of the moment with a playful, easy-to-use service. Now Instagram's fans wonder whether its identity will be retained. Copyright © 2012 NPR. For personal, noncommercial use only. Picture this: Instagram could be worth $35 billion.

"Citi’s Mark May issued a new valuation estimate for the popular app, far above the bank’s prior $19 billion valuation, a loftier view on the asset that May attributed to Instagram’s announcement last week that it had reached more than 300 million total users. “While Instagram is still early in monetizing its audience and data assets and its financial contribution to Facebook is minimal today, we believe that it is quickly gaining monetization traction and would contribute more than $2 billion in high-margin revenue at current user and engagement levels if fully monetized,” May wrote in a research report." – daxjacobson

Pinterest valuation: Worth billions, no revenue. Photo by Steve Jennings/Getty Images for The Crunchies Matthew Yglesias is on vacation.

Pinterest valuation: Worth billions, no revenue.

Pinterest Raises More Money, Fetching a Valuation of $5 Billion. Photo The business of online scrapbooking is getting more valuable — at least in the eyes of investors.

"Advertisements are beginning to invade Pinterest users’ personal spaces. Some users of the photo-bookmarking site will now see ads as soon as they log in to the website or open the app. The company has started testing paid-for “pins” in users’ home feed—the page displaying images collected by the users and interests they follow. The move expands Pinterest’s rollout of ads that began earlier this month. Until now, it had limited the ads to search results and when users browse through categories such as tattoos, travel and weddings. The company, launched in 2010, has been deliberately slow in rolling out its advertising business, taking the time to build out its team and learn what kind of ads work best in different scenarios. It tested its first ad product, called a “promoted pin,” for six months last year before opening it up to all brands earlier this month. But now it wants to pick up the pace. “I would say we are speeding things up because the advertisers are ready,” said Joanne Bradford, Pinterest’s head of partnerships. “We’ve worked very hard over the course of the beta period and took all those learnings and built a very aggressive roadmap for 2015.”" – daxjacobson

Pinterest said on Thursday that it has raised $200 million in a new round of fund-raising, at a valuation of $5 billion.

Pinterest Raises More Money, Fetching a Valuation of $5 Billion

At that level, the social network has joined the upper echelons of the start-up hierarchy. The money will come from existing investors: SV Angel, Bessemer Venture Partners, Fidelity, Andreessen Horowitz, FirstMark Capital and Valiant Capital Partners. Despite some tremors in the market for newly public start-ups, the darlings of the venture capital world have little trouble drawing investor interest. Such companies have been eager to draw in as much money as possible, while investors are still in a giving mood. Snapchat Doesn’t Make Any Money, So Why Is It Worth So Much? Nov 14, 2013 1:22pm The founders of Snapchat, a mobile app that lets mostly teenagers send mostly naked pictures of themselves, were recently offered $3 billion for the company, only to turn it down.

"Discover has been in the works — and reported on extensively — for much of last year. Over that time, Snapchat executives have changed its name, prospective launch date and business terms, but the main thrust has remained the same: Snapchat users will be able to skim a selection of multimedia content from publishers including ESPN, CNN, Vice and Warner Music; Snapchat will sell ads against the videos, photos and articles, and share the revenue with the publishers." – daxjacobson

So are its young founders crazy or is the company is worth much more?

Snapchat Doesn’t Make Any Money, So Why Is It Worth So Much?

Snapchat doesn’t make any money. Founded just three years ago, it doesn’t have a long record of success. Nor is the management team exactly seasoned; the last jobs Evan Spiegel, 23, and Bobby Murphy, 25, had were as fraternity brothers at Stanford. So why would Facebook CEO Mark Zuckerburg reportedly offer a pair of 20-somethings so much money? In short, people–some people at least–think Snapchat is a good idea that has a lot of potential. Spritz. Where does the value come from? An exercise. Network structure: one-sided or two-sided markets? Competing in these markets is tough!

Move early (Yahoo! Auctions in Japan) Subsidize product adoption (PayPal) Leverage viral promotion (Skype; Facebook feeds) Expand by redefining the market to bring in new categories of users (Nintendo Wii) or through convergence (iPhone). Form alliances and partnerships (NYCE vs. Citibank) Establish distribution channels (Java with Netscape; Microsoft bundling Media Player with Windows) Seed the market with complements (Blu-ray; Nintendo) Encourage the development of complementary goods—this can include offering resources, subsidies, reduced fees, market research, development kits, venture capital (Facebook fbFund). Maintain backward compatibility (Apple’s Mac OS X Rosetta translation software for PowerPC to Intel) For rivals, be compatible with larger networks (Apple’s move to Intel; Live Search Maps) For incumbents, constantly innovate to create a moving target and block rival efforts to access your network (Apple’s efforts to block access to its own systems) For large firms with well-known followers, make preannouncements (Microsoft) – daxjacobson

MySpace Still Reaches 50 Million People Each Month. Justin Timberlake. Strategies for MySpace? Recap - Network effects, network markets and the fight for our data.