facebook vs instagram competitve law

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    Facebook versus InstagramCompetitive Law

    Batch-24

    Ajay N Jadhav 106

    Sameer Mahato 93Sharad.S 24

    Under Guidance of Prof.Vaibhav

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    History

    Facebook

    Instagram

    The U.S. FTC investigation on acquisition

    The Days of Transition and Acquisition

    Relevant Questions for the Deal

    Why FB really acquired Instagram?

    Pros & Cons Of FB Acquisition

    Conclusion

    Contents

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    Facebook founder and CEO Mark Zuckerberg

    FOUNDER

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    In January 2004, Mark Zuckerberg began writing thecode for a new website, known as 'the Facebook'. Hesaid in an article in The Harvard Crimson that he wasinspired to make Facebook from the incident of

    Facemask: "It is clear that the technology needed tocreate a centralized Website is readily available ... thebenefits are many.

    On February 4, 2004, Zuckerberg launched "The

    Facebook", originally located at the facebook.com. Hetold The Crimson, "Everyones been talking a lot about auniversal face book within Harvard. I think its kind ofsilly that it would take the University a couple of years toget around to it as I can do it better than they can, and I

    can do it in a week.

    History of Facebook

    http://en.wikipedia.org/wiki/The_Harvard_Crimsonhttp://en.wikipedia.org/wiki/The_Harvard_Crimson
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    Zuckerberg also stated his intention to create auniversal website that can contact people around theuniversity. According to his roommate, DustinMoskovitz, "When Mark finished the site, he told a

    couple of friends ... then one of them suggested puttingit on the Kirkland House online mailing list, which was ...three hundred people." Moskovitz continued to say that,By the end of the night, we were ... actively watching

    the registration process. Within twenty-four hours, wehad somewhere between twelve hundred and fifteenhundred registrants.

    History of Facebook

    http://en.wikipedia.org/wiki/Dustin_Moskovitzhttp://en.wikipedia.org/wiki/Dustin_Moskovitzhttp://en.wikipedia.org/wiki/Dustin_Moskovitzhttp://en.wikipedia.org/wiki/Dustin_Moskovitz
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    History of Facebook

    The homepage of [thefacebook] on February 12, 2004

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    INSTAGRAM FOUNDERS

    [Instagram's founders from left, Mike Krieger and Kevin Systrom.]

    http://tctechcrunch2011.files.wordpress.com/2012/04/57_codypickensportrait01001-1.jpeg
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    History of Instagram

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    History of Instagram

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    History of Instagram

    Instagram development began in San Francisco,when Kevin Systrom and Michel "Mike" Kriegerchose tofocus their multi-featured HTML5 check-in

    project Burbn on mobile photography. On March 5, 2010, Systrom closed a $500,000 seed

    funding round from Baseline Ventures andAndreessenHorowitz while working on Burbn.

    The product launched inApple's App Store on October 6,2010.Shortly after the launch, Josh Riedel joined thecompany as Community Manager.[citation -needed] Shayne Sweeney joined in November 2010 asan engineer and Jessica Zollman was hired as aCommunity Evangelist in August 2011.

    http://en.wikipedia.org/wiki/Kevin_Systromhttp://en.wikipedia.org/wiki/Mike_Kriegerhttp://en.wikipedia.org/wiki/HTML5http://en.wikipedia.org/wiki/Seed_fundinghttp://en.wikipedia.org/wiki/Seed_fundinghttp://en.wikipedia.org/wiki/Andreessen_Horowitzhttp://en.wikipedia.org/wiki/Andreessen_Horowitzhttp://en.wikipedia.org/wiki/Apple_Inc.http://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Apple_Inc.http://en.wikipedia.org/wiki/Andreessen_Horowitzhttp://en.wikipedia.org/wiki/Andreessen_Horowitzhttp://en.wikipedia.org/wiki/Seed_fundinghttp://en.wikipedia.org/wiki/Seed_fundinghttp://en.wikipedia.org/wiki/HTML5http://en.wikipedia.org/wiki/Mike_Kriegerhttp://en.wikipedia.org/wiki/Kevin_Systrom
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    History of Instagram

    Instagram is a free photo sharingprogram launched inOctober 2010 that allows users to take a photo, apply adigital filterto it and then share it on a variety ofsocial

    networking services, including Instagram own. A distinctive feature confines photos to a square

    shape, similar to Kodak Instamaticand Polaroid images, in contrast to the 4:3 aspect

    ratio typically used by mobile device cameras. Instagram was initially supported on iPhone, iPad,

    and iPod Touch; in April 2012, the company addedsupport forAndroidcamera phones running 2.2 (Froyo)or higher. It is distributed via the iTunes AppStore and Google Play.[2]

    http://en.wikipedia.org/wiki/Photo_sharinghttp://en.wikipedia.org/wiki/Application_softwarehttp://en.wikipedia.org/wiki/Photographic_filterhttp://en.wikipedia.org/wiki/Social_networkinghttp://en.wikipedia.org/wiki/Social_networkinghttp://en.wikipedia.org/wiki/Instamatichttp://en.wikipedia.org/wiki/Instant_camerahttp://en.wikipedia.org/wiki/Aspect_ratio_(image)http://en.wikipedia.org/wiki/Aspect_ratio_(image)http://en.wikipedia.org/wiki/IPhonehttp://en.wikipedia.org/wiki/IPadhttp://en.wikipedia.org/wiki/IPod_Touchhttp://en.wikipedia.org/wiki/Android_(operating_system)http://en.wikipedia.org/wiki/Cameraphonehttp://en.wikipedia.org/wiki/Android_version_historyhttp://en.wikipedia.org/wiki/App_Store_(iOS)http://en.wikipedia.org/wiki/App_Store_(iOS)http://en.wikipedia.org/wiki/Google_Playhttp://en.wikipedia.org/wiki/Instagramhttp://en.wikipedia.org/wiki/Instagramhttp://en.wikipedia.org/wiki/Google_Playhttp://en.wikipedia.org/wiki/App_Store_(iOS)http://en.wikipedia.org/wiki/App_Store_(iOS)http://en.wikipedia.org/wiki/Android_version_historyhttp://en.wikipedia.org/wiki/Cameraphonehttp://en.wikipedia.org/wiki/Android_(operating_system)http://en.wikipedia.org/wiki/IPod_Touchhttp://en.wikipedia.org/wiki/IPadhttp://en.wikipedia.org/wiki/IPhonehttp://en.wikipedia.org/wiki/Aspect_ratio_(image)http://en.wikipedia.org/wiki/Aspect_ratio_(image)http://en.wikipedia.org/wiki/Instant_camerahttp://en.wikipedia.org/wiki/Instamatichttp://en.wikipedia.org/wiki/Social_networkinghttp://en.wikipedia.org/wiki/Social_networkinghttp://en.wikipedia.org/wiki/Photographic_filterhttp://en.wikipedia.org/wiki/Application_softwarehttp://en.wikipedia.org/wiki/Photo_sharing
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    The U.S. Federal Trade Commission has beeninvestigating Facebooks pending $1 billion acquisitionof the popular photo sharing app Instagram.

    This has left some people scratching their heads,wondering why the FTC in the middle of its expansiveand thorough investigation ofGoogle and with all elsethe FTC has on its plate is looking at the acquisition

    of a single app and a company with less than a dozenemployees.

    Although the FTC hasnt commented on itsinvestigation, some explanation can be found in howtech markets function generally and what Instagramfuture role in those markets may be

    The U.S. FTC investigation

    http://www.facebook.com/http://www.instagram.com/http://finapps.forbes.com/finapps/jsp/finance/compinfo/CIAtAGlance.jsp?tkr=googhttp://www.instagram.com/http://www.instagram.com/http://finapps.forbes.com/finapps/jsp/finance/compinfo/CIAtAGlance.jsp?tkr=googhttp://www.instagram.com/http://www.facebook.com/
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    As an initial matter, its important to note that the

    antitrust agencies inquiries into mergers andacquisitions turn on the potential of the deals to harmcompetition. The agencies attempt to assess whatcompetition would look like in the future, first withoutthe deal and then comparing that to what might happenwith the deal.

    In fact, the agencies are required by law to try to peerinto the future. The governing antitrust law, Section 7of the Clayton Act,prohibits acquisitions where . . .the effect of such acquisition may be substantially tolessen competition, or to tend to create amonopoly. (Emphasis added.)

    http://en.wikipedia.org/wiki/Clayton_Antitrust_Acthttp://en.wikipedia.org/wiki/Clayton_Antitrust_Acthttp://en.wikipedia.org/wiki/Clayton_Antitrust_Acthttp://en.wikipedia.org/wiki/Clayton_Antitrust_Act
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    Congress used the words maybe substantially tolessen competition (emphasis supplied), to indicatethat its concern was with probabilities, not certainties,because the inquiry is prospective by

    definition. See Brown Shoe Co. v. United States, 370U.S. 294, 323 (1962).

    http://scholar.google.com/scholar_case?case=9571017711360259745&hl=en&as_sdt=2&as_vis=1&oi=scholarrhttp://scholar.google.com/scholar_case?case=9571017711360259745&hl=en&as_sdt=2&as_vis=1&oi=scholarrhttp://scholar.google.com/scholar_case?case=9571017711360259745&hl=en&as_sdt=2&as_vis=1&oi=scholarrhttp://scholar.google.com/scholar_case?case=9571017711360259745&hl=en&as_sdt=2&as_vis=1&oi=scholarrhttp://scholar.google.com/scholar_case?case=9571017711360259745&hl=en&as_sdt=2&as_vis=1&oi=scholarrhttp://scholar.google.com/scholar_case?case=9571017711360259745&hl=en&as_sdt=2&as_vis=1&oi=scholarr
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    A 2 year old company run by a dozen of employeeshas managed to su rpass a 160 year old

    organ ization (New York Times). This is a signal of

    t ime to come. Social Media is here to stay and the

    transit ion to d igi tal space has already begun .

    Facebook Monday, April 9th, 2012

    Facebook acquires InstagramThe Days of Transition and Acquisition

    http://www.pragmaticlearning.in/blog/wp-content/uploads/image.jpg
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    Facebook acquires InstagramThe Days of Transition and AcquisitionLets have a look at the growth of Instagram since its inception.

    http://www.pragmaticlearning.in/blog/wp-content/uploads/instagram-stats.jpg
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    Facebook acquires InstagramThe Days of Transition and AcquisitionSomething sim i lar to the way Facebook has progressed inthe past, to a much smal ler extent o f course.

    http://www.pragmaticlearning.in/blog/wp-content/uploads/fb-stats.png
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    The relevant questions for theFacebook/Instagram deal

    What might Instagram be able to accomplish on its own inthe marketplace?

    Is there a risk that Facebooks acquisition would

    undermine that, and what might that mean for

    competition?

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    Notwithstanding its handful of employees and possiblelack of capital relative to the major tech firms,Instagram has shown remarkable success in acquiringthe single most important asset in technology markets:

    users.

    And it has done so at a phenomenal pace: 30 million-plus users in two years. Whether youre talking about

    PC or mobile operating systems, Web browsers, searchengines, or tablets, the single greatest competitiveadvantage is the number of users.

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    This is because of something the economists andantitrust lawyers call network effects, i.e., a piece oftechnology becomes more valuable as more peopleuse it. Thats because the more people who use apiece of software or hardware technology, the moredevelopers create complementary functionality for thattechnology, which makes that technology morevaluable and leads to more users, and so on and so on.Its a positive feedback loop.

    The iPad is a great piece of technology for manyreasons, but the single biggest factor in the iPadssuccess has been the quantity and quality of the apps,.

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    which exist because so many people use them that it isvaluable for app developers to write to the iOS platform

    The fact that millions of people use and apparently love

    Instagram for sharing their photos means thatInstagram has the potential although it is far fromcertain to one day compete with Facebook in socialnetworking.

    Adding functionality like a wall to Instagrams photosharing is technologically relatively simple. Instagramhas already done the hard part: attracting a large user

    base.

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    Think about Google+: one day Google had minimalsocial networking capabilities; the next it was a full-oncompetitor to Facebook.

    What principally enabled Google to flip the switch wasits large user base. Although the software engineers dida great job adding the functionality, it wouldnt havemattered without the hundreds of millions of Googleand Gmail users.

    One would therefore expect the FTCs investigation toturn on Instagrams future plans, as evidenced byinternal documents and interviews with its head.

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    business-people, and also on internal Facebookdocuments and whether there is evidence thatFacebook views Instagram as a credible threat toFacebooks position in social networking

    If Instagram had no plans to go up against Facebook,Google+, and other, smaller social networks, thenFacebooks acquisition wouldnt change the status quo,anyway (the antitrust agencies cannot force firms to

    compete, either legally or practically.)

    Finally, a word about the size of the deal and theantitrust break-up fee.

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    The rumor is that Twitter had offered $500 million, butMark Zuckerberg boldly doubled the price andconcluded the deal in a weekend, which included a$200 million break-up fee if antitrust regulatorsquashed the deal.

    In terms of antitrust analysis, these facts could cut ineither direction. Doubling Instagrams price either couldreflect strategic value, which is business-speak forcreating or enhancing market strength, or could reflecta smart 28-year-old with a billion dollars to spend whosees a great product.

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    And the break-up fee could be Instagrams ask, andFacebooks grant because it is confident it will getantitrust clearance and not have to pay it.

    Whatever happens, it will be interesting to watch thedeal and the antitrust agencies investigationunfold. This is about as cool as we antitrust lawyersget to be.

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    Why did Facebook reallyacquire Instagram?

    1. Talent Acquisition

    Sometimes a company buys another one, knowing thatit will shut it down, but plans to keep all of the super-talented staff to work for them. Recent examples of thisinclude Gowalla and Lightbox, who were both acqui-hired by Facebook. Theres no doubt that this can be a

    great move, but a price tag of $1bn for 11 people (in thecase of Instagram) isnt exactly a cheap way to dobusiness.

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    Why did Facebook reallyacquire Instagram?

    2. Tech Acquisition

    Often companies buy other smaller companies for theproducts they have produced. These smallercompanies tend not to have many customers becausethey cant afford to do much marketing, so are spottedand snapped up before they get much traction. Ofcourse, this wasnt the case with Instagram, who hadlots of traction (35 million users).

    The supposition that Facebook bought Instagrambecause they couldnt build its features themselves is

    also completely untrue.

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    Why did Facebook reallyacquire Instagram?

    2. Tech Acquisition

    In an interview with Business Insider(http://articles.businessinsider.com/2011-11-28/tech/30449353_1_android-instagram-app),Instagram CEO Kevin Systrom said the followingIfyou go to my Flickr page, youll see a photo that lookslike an Instagram photo from about 2007. Ive alwaysbeen into taking my photos, cropping them square,putting them through a filter in Photoshop. We justreverse engineered how to do filters, now we opened it

    up to the masses.

    http://articles.businessinsider.com/2011-11-28/tech/30449353_1_android-instagram-apphttp://articles.businessinsider.com/2011-11-28/tech/30449353_1_android-instagram-apphttp://articles.businessinsider.com/2011-11-28/tech/30449353_1_android-instagram-apphttp://articles.businessinsider.com/2011-11-28/tech/30449353_1_android-instagram-apphttp://articles.businessinsider.com/2011-11-28/tech/30449353_1_android-instagram-apphttp://articles.businessinsider.com/2011-11-28/tech/30449353_1_android-instagram-apphttp://articles.businessinsider.com/2011-11-28/tech/30449353_1_android-instagram-apphttp://articles.businessinsider.com/2011-11-28/tech/30449353_1_android-instagram-apphttp://articles.businessinsider.com/2011-11-28/tech/30449353_1_android-instagram-apphttp://articles.businessinsider.com/2011-11-28/tech/30449353_1_android-instagram-apphttp://articles.businessinsider.com/2011-11-28/tech/30449353_1_android-instagram-app
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    Why did Facebook reallyacquire Instagram?

    2. Tech Acquisition

    Facebook have proven that they have deep pockets itwouldnt have been difficult for them to hire a fewPhotoshop junkies to reverse engineer some filters forthem. However, consider each of these headlinesFacebook releases Instagram clone or Facebookintegrates technology from recent purchase Instagraminto new Camera app. Clearly, the second is far moredesirable.

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    Why did Facebook reallyacquire Instagram?

    2. Customer acquisition

    Bearing more resemblance to traditional mergers,

    companies sometimes buy other companies so they can gettheir hands on all their users. There are a lot of differentreasons why a CEO might want to do this, but it often comesdown to eyeballs. When Facebook acquired Instagram and

    Newscorp acquired MySpace stories about the buyouts weresplashed all over the covers ofwell, everything. Takingsomething that already has a fanatical user base, as both ofthe above services did, truly mainstream (even my grandmaknows what Instagram is now) is worth spending moneyon.

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    Why did Facebook reallyacquire Instagram?

    4. Competition Acquisition

    Sometimes the owner of a company feels (whether or not its

    actually the case is another matter) that it has to acquire acompetitor to protect the company. While photos is a hugepart of Facebooks offering (2.7 million uploaded every 20minutes), Instagram was a real threat before the

    acquisition they were seeing 5 million photos uploadedevery day.

    Certainly, theres a big gap between those numbers, buttheres an equally big gap between the value of thosephotos while a lot of Facebook users simply

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    Why did Facebook reallyacquire Instagram?

    4. Competition Acquisition

    upload hundreds of holiday photos out of habit, photos on

    Instagram. tend to have an aspirational quality to them;many represent a distinct memory that people are excited topreserve. The same cant be said of many social networks Pinterest and Tumblr both have an aspirational quality but

    rely heavily on recycled content, and Twitter (in very generalterms) tends to be more about words than pictures

    Did Facebook just get scared and write a big cheque to takeout a competitor? Maybe, but if Zuck is astute as his trackrecord (up until the botched IPO anyway) suggests,theres much more to it than that.

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    Why did Facebook reallyacquire Instagram?

    4. Competition Acquisition

    Regardless, theres a lesson to be learnt from the takeover

    you dont need to build a Facebook killer to become a multi-millionaire; you just need to build something thats starting tolook like oneeven if only through a tilt shifted sepia filter.

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    The pros and cons of one ofFacebooks most importantacquisitions:

    Pros:

    Facebook will become an even more powerful medium forphotographers and artists who wish to share their work. Upuntil this time, Facebook has been a common medium for allpeople looking to promote their work and gather followers.Facebook acquiring Instagram means it will likely be heavily

    investing in new photo app and storage features that willlikely attract many new photographers and artists and givethem new opportunities to network.

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    Instagram will have the capital to develop tons of newfeatures. Instagram itself will now be flush with cash and will

    have the financial ability to significantly develop their brand.Not only will existing features become more web-friendly,new features will likely become powerful cross-platformapplications.

    Pros:

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    Cons:

    They risk alienating a niche consumer base.

    Facebook/Instagram will soon be tampering with anextremely organic and clique-ish community that may dislikean infusion of hundreds of thousands of users. This largeruser base will dramatically speed up the movement of the

    image feed, which could lead to unrest as more qualityimages get buried under a pile of others.

    Its unclear whether or how Facebook will store the old

    Instagram photos. Your previous ability to keep some photosprivate may now be jeopardized by Facebook data mining.

    http://www.digitaltrends.com/mobile/facebook-had-to-buy-instagram-heres-why-and-what-it-means-for-you/http://www.digitaltrends.com/mobile/facebook-had-to-buy-instagram-heres-why-and-what-it-means-for-you/http://www.digitaltrends.com/mobile/facebook-had-to-buy-instagram-heres-why-and-what-it-means-for-you/http://www.digitaltrends.com/mobile/facebook-had-to-buy-instagram-heres-why-and-what-it-means-for-you/http://www.digitaltrends.com/mobile/facebook-had-to-buy-instagram-heres-why-and-what-it-means-for-you/http://www.digitaltrends.com/mobile/facebook-had-to-buy-instagram-heres-why-and-what-it-means-for-you/
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    Coin flip:

    Facebook will become more powerful in the social mobilearena. Whether or not this will water down their service ormake it even more functional remains to be seen. Somethink Facebook is becoming messy, and may be following

    the path of MySpace.

    Facebook will be flooded with exponentially more Instagramphotos. This one of course depends on whether or not you

    like the Instagram aesthetic. If you do, this new flood willlikely be a welcome development.

    http://www.telegraph.co.uk/technology/facebook/9195460/Facebook-buys-Instagram-a-desperate-attempt-to-stay-cool.htmlhttp://www.telegraph.co.uk/technology/facebook/9195460/Facebook-buys-Instagram-a-desperate-attempt-to-stay-cool.html
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    Coin flip:

    If you do not like Instagram and in fact think it is the hipsterequivalent of Low-Fi art automation, you could find youronce beloved Facebook News Feed buried in unwieldyInstagram images.

    Financially speaking, the Facebook/Instagram acquisitionwill certainly behoove both companies in the short run.Whether or not the merger affects brand loyalty or quality ofservice in the long run remains to be seen. For now, itsexciting to keep an eye on the salient details of this veryinteresting social media honeymoon.

    http://www.washingtonpost.com/business/technology/what-makes-instagram-worth-1-billion-to-facebook/2012/04/10/gIQAmEI37S_story.htmlhttp://www.washingtonpost.com/business/technology/what-makes-instagram-worth-1-billion-to-facebook/2012/04/10/gIQAmEI37S_story.html
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    Coin flip:

    If you do not like Instagram and in fact think it is the hipsterequivalent of Low-Fi art automation, you could find youronce beloved Facebook News Feed buried in unwieldyInstagram images.

    Financially speaking, the Facebook/Instagram acquisitionwill certainly behoove both companies in the short run.Whether or not the merger affects brand loyalty or quality ofservice in the long run remains to be seen. For now, itsexciting to keep an eye on the salient details of this veryinteresting social media honeymoon.

    http://www.washingtonpost.com/business/technology/what-makes-instagram-worth-1-billion-to-facebook/2012/04/10/gIQAmEI37S_story.htmlhttp://www.washingtonpost.com/business/technology/what-makes-instagram-worth-1-billion-to-facebook/2012/04/10/gIQAmEI37S_story.html
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    Conclusion:

    However, its the governments job to prevent any anti-competitive actions. And that is why the FTC should haveblock this deal from happening. Facebook cant just beallowed to buy upand shut down any smaller company

    that shows some promise to one day takeover its mantle asking of social in the new mobile world.

    Its not illegal to have a monopoly as Facebook does today

    in the social networking space. However, its illegal toacquire or maintain one through anti-competitivemeans. And this is at the heart of what Facebook is doingby taking Instagram off the market.

    http://www.zdnet.com/blog/facebook/facebook-acquisition-complete-gowalla-shuts-down/10327http://www.zdnet.com/blog/facebook/facebook-acquisition-complete-gowalla-shuts-down/10327
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    Conclusion:

    And, as for the risk of curtailing innovation argument, howdoes that hold any water? Will any new entrepreneur at anynew start-up suddenly stop breathing, taking risks, andcreating great products because Facebook isnt allowed to

    acquire and shut down a rival?

    The government should have blocked this clearly anti-competitive move and would have let Instagram continue to

    compete effectively with Facebook in this brave new mobileworld.