Imagine if you had entered college in 1999 and left grad school in 2005. You wouldn’t know much of the dot-com boom and the bizarre billion dollar acquisitions of companies that had not made a single dollar and had no clear chance or plan of ever doing so. The tech boom of 2010 would seem a new and momentous event. The automobile revolution of the early 21st century, not the tulip craze. Should you meet a naysaying curmudgeon from the last decade, and need a voice to counter his pessimism, Don Dodge would be your man. Here he is, talking about the mind-boggling billion dollar acquisition of photo-mutilation service Instagram by Facebook – he will have none of the incredulity over a billion dollar price on a product that can be built out in a week:
Success looks easy from a distance. Technology seems simple if the design is great. Attracting great founders and early employees just means rounding up some of your friends. Raising money is always easy, right? Getting great press stories just takes a few emails. Attracting influential users just sort of happens. Viral growth is a simple formula. Solving a problem that millions of people care about is just luck.
He’s being sarcastic, of course. His point is that it’s not the ability to code up Instagram in a week that matters:
From a technical point of view there isn’t much difference between Instagram, Path, Oink, Hipster, or a bunch of other companies that all do essentially the same things. Mobile, social, photo apps that include comments and some type of friend/follow model. Why is one worth $1B and another shut down with no value? It isn’t about the technology or how long it took to build.
Taken together, these two quoted sections, and the refinements that he offers later in the piece (“first mover advantage”, “design”, “timing and luck”), form Dodge’s defence of Instagram:
Technology can be replicated, timing and luck can’t.
Yes well, perhaps that’s true, but how does one plan for and build a business around luck, or even finely targeted timing? The lecture might help business development guys understand the sad reality of tech M&A blackjack, but it fails as a response to the complaint about the shallowness of the technology, or even the actual viability of the business. Dodge mixes in legitimate value (“solving a problem that millions of people care about”, “[superior] design and user experience”) and milestones (“raising money”) each of us which can be intelligently argued about, with dubious metrics (“attracting influential users”), because there is, in my opinion, a fundamental error in his logic.
The error is the premise that Instagram is a success. The problem is, it is not. At least not yet (and now we will never know). It is true that for some unfathomable reason 30 million people have shown some interest in sharing mangled photographs of no particular value with strangers. And that’s 29.9 million more users than the other photo mangling services. Not one of these users pays a dime, though. Nor does Instagram, as far as I know, make money through alternate means. So, per Dodge’s reasoning, they managed to give away free stuff to way more people. Yay. Of course every male college student grabs a handful of free condoms when he passes by the vending machine. Whether a “problem that millions of people care about” is being solved would be better answered the old-fashioned way: worth measured by how much these people are willing to pay to solve this problem.
That’s harsh, I admit. After all, nobody in tech knows how to make cash money selling their product any more (other than Apple). Why should Instagram be measured by this strict criteria? Okay then, how does one determine the value of the service? That’s the point of measuring the technology. Dodge would rather we use the familiar tautology: nothing succeeds like success. Instagram has 30 million users paying zero dollars. We may not know therefore if they are really solving a problem that millions care about, or if they could have gone on with this sort of philanthropy for much longer. No matter. They now also have one giant non-user paying 1000 million dollars. That’s success enough, in Dodge’s book.
