Facebook's Instagram Deal Will Be a 'Bust'

Facebook's billion-dollar purchase of Instagram has generally been met with praise in the tech world, an example of how Mark Zuckerberg can strike decisively to shore up a weakness. Chunka Mui at Forbes has a different view: "We'll look back on the acquisition as a bust—much in the same way we now view News Corp.’s purchase of Myspace, AOL’s purchase of Bebo, and Excite@Home’s purchase of Blue Mountain Arts." Instagram, he writes, doesn't have magic solutions on how to make money from users or figure out mobile advertising any more than Facebook does.

Like the other "bust" examples, this one smacks of a boss looking for "a quick fix to a strategic problem" by opening the checkbook. That almost always ends badly. We'll know soon enough if Facebook has to start taking embarrassing writedowns. In the meantime, remember that the deal hasn't formally closed yet, and Mui points out that Facebook could still use an escape hatch of paying a $200 million penalty to get out of it. Read the full column here. (More Instagram stories.)