Facebook Moves Swiftly to Add Innovation From the Outside

NEWS ANALYSIS: Facebook, despite its nearly 3,000 employees, apparently doesn't have time or bandwidth to create all the way-cool apps by itself, so it is using its $5 billion IPO line of credit to acquire new ideas.

Let's get this straight: Kodak, which has been in the image business for 100 years, used to be the biggest employer in the city of Rochester, N.Y., and has been a household name for generations, is bankrupt. On the other hand, Instagram, which has been in the image business for 555 days, has no revenue, and employs a mere 13 people, is now worth $1 billion.

Who knew?

Let's chat for a few minutes about three things: 1) Facebook, which bought Instagram last Monday for all that cash; 2) TagTile, Facebook's latest acquisition (on Friday, purchase price unknown, but it probably wasn't $1 billion); and 3) innovation.

So What Did Facebook Buy?

For backgrounders, let's define Instagram and TagTile.

/images/stories/eweek.logo.analysis1.jpgInstagram is an application that enables an iPhone or Android device user to share photos with friends using a Photoshopped appearance. (Yes, Photoshop, the product name, has become both a verb and adjective.) Users choose a filter to transform the photo's look and feel, then post to the Instagram site, which is easily connected to Facebook and other social networks.

Facebook, despite its nearly 3,000 employees, apparently didn't have time or bandwidth to create this way-cool app itself, so it simply made a deal that we heard took a mere 48 hours to complete.

TagTile, which joined the Facebook team on April 13, is both a cloud application and piece of hardware called the TagTile Cube for businesses. Customers buying an item at a TagTile-affiliated store or restaurant tap their iOS or Android phones on the Cube as they are leaving. Then, should they choose to do so, they can share their enjoyment of the business to their friends with the tap of a button. It therefore follows, naturally, that if the customer is not satisfied, that not-so-good comments also may be networked out to the world.

/images/stories/facebook-thumb.up.pngMerchants, meanwhile, receive this valuable information, store it, can analyze it, can track their customer bases and send custom offers directly to their phones. Or they can send makeup offers, if the customer experience was not optimal.

So this is what Facebook is doing in the days leading up to what likely will become the largest initial public offering of stock in business history--an IPO worth some $5 billion. The brash social networking company has now resorted to buying good ideas.

Nobody is saying this is bad. In fact, this is the way most of the big players in IT now are moving. Technology advancement moves so fast, is so pervasive and so fickle, that companies that do not look to the outside for good ideas undoubtedly will be bypassed by competitors at some point.

Chris Preimesberger

Chris J. Preimesberger

Chris J. Preimesberger is Editor of Features & Analysis at eWEEK, responsible in large part for the publication's coverage areas. In his 12 years and more than 3,900 stories at eWEEK, he...