This article was published on December 28, 2012

Facebook recovers nearly all losses brought on by false Instagram story


Facebook recovers nearly all losses brought on by false Instagram story

Following the brouhaha concerning a supposedly massive decline in Instagram usership, Facebook’s stock recovered today, closing a mere half point down, having reached breakeven for the day shortly before.

As QZ noted earlier, the story declaring that Instagram had lost perhaps a quarter of its active users cost Facebook 2.9% of its value in the public market.

The final closing price for Instagram, $715 million dollars, was no trivial sum. If the photo sharing application lost 25% of its active userbase, Facebook might have stood to lose hundreds of millions of dollars in goodwill.

However, the idea that Instagram was suffering from a painful decline in usership was patently false, as the service continues to grow. The company itself noted that it continues “to see strong and steady growth in both registered and active users.” Well then.

Facebook closed the day’s trading with a market capitalization of $56 billion. 2.9% of that sum – using overly simplified mathematics to make a small point – is north of $1.5 billion. Keeping that figure in mind, the market perhaps overreacted to a purported decline in an asset that was eventually purchased at something of a discount, when compared to the initial offer price.

I say that delicately as the value of Instagram isn’t wholly financial per se, or at least not yet, as the service currently generates minimal to no revenue. Therefore to quantitize impairment of its value based only on its purchase price is perhaps short-sighted. However, a full quarter slowdown in its active userbase would certainly have lowered its balance sheet presence.

It is simply argued that Instagram’s value to Facebook is and will remain non-financial for the next several years.

Happily for Facebook, as the story was tamped down as utter hokum, its share price recovered. Major indexes were down between 0.5% and 1% on the day, so the company’s final resting point is within normal expectations.

Twain had it right when he said that the truth can’t even find its pants before a lie has been around the world. This morning we saw some of that. The narrative should have failed the gut check test: a full fourth over a TOS dispute? Surely not.

Top Image Credit: Steve Snodgrass

Get the TNW newsletter

Get the most important tech news in your inbox each week.

Also tagged with


Published
Back to top