Last month, the bureaucrats who comprise the Federal Trade Commission worked through their last objection to Facebook's (Nasdaq:FB) purchase of Instagram. The heralded $1 billion deal, now a $741 million deal, thanks to Facebook's descending stock price, has finally become official. From now on, it'll presumably be easier than ever to create and share photos that look like they were taken during the Nixon administration.

However, photo-sharing services aren't a toy, at least not for the companies buying them. Facebook paid handsomely for Instagram in an attempt to increase the former's mobile revenue, which has stagnated as people make the transition from desktop to mobile apps. Display ads are easy to present and make legible on a 13-inch screen without compromising whatever the featured content is; not so much on a four-inch screen.

Forex Broker Guide: Using the right broker is very essential when competing in today's forex marketplace

Google's Response
Google (Nasdaq:GOOG) is not a company to remain static while its quasi-competitors are looking for new revenue sources. The search-and-beyond leviathan recently entered the photo editing acquisition game with its purchase of Nik Software. While neither company disclosed details, we do know that the acquisition target is no upstart desperate to cash in; Nik is a 17-year-old company based in San Diego with satellite offices in Hamburg. Furthermore, the acquirer in this transaction is not exactly operating on a skimpy budget.

So what does all this mean? If you haven't heard of Nik, there's a better chance that you've at least heard of its most popular service, Snapseed.

SEE: 5 Surprising Companies Google Owns

Snapseed is photo-editing (as distinguished from photo-filtering) software, an established favorite of discriminating professionals around the world. Snapseed is far more than an Instagram clone, despite reports from a media that rarely has time for details. In fact, it could be said that Instagram is to Snapseed what Facebook is to Google. Instagram is little more than a photo filtering service with a social media presence, allowing amateurs to make photos look archaic and then share them with minimal effort. Meanwhile Snapseed offers true editing, letting photographers modify everything from saturation to texture strength to tilt. Furthermore, Snapseed works on photos that are in a shape other than square. If Instagram is a microwave oven, Snapseed is a La Cornue Grand Palais 180 kitchen range.

Facebook Vs. Google
Continuing with the analogy, Facebook is a glorified mixer where you get to congregate with the friends you already know while ignoring the majority of people in the room. Google is about as revolutionary as a company can be, redefining the way we read, research, communicate, organize our lives and - in the case of Google Maps and Google Earth - view the world. Not coincidentally, Facebook continues to struggle financially while Google is one of the largest and most profitable corporations on the planet.

The consensus opinion among wags and analysts is that Google's purchase of Nik is an attempt to do for Google's social networking service, Google+, what Instagram is supposed to do for Facebook.

SEE: Good For Facebook, Bad For Google And Apple

Instagram boasts 100 million users, most of them dilettantes looking for, as the company bills its software, "a fun and quirky way to share your life with friends through a series of pictures."

Snapseed has far fewer users - 9 million as of its last estimate, although that should drastically increase under Google's ownership. However, while Instagram is free, Snapseed's users pay for the service: $5 for iPad and iPhone, and $20 for Windows and Mac.

The Future for Snapseed and Google
Notice anything missing from that price list? If you want a mobile version of Snapseed, you're out of luck if you happen to have a phone that uses America's most popular mobile operating system, Google's own Android. Nik's official line is that Snapseed for Android is "coming soon," a vague timeline that we can assume will be accelerated after Google's acquisition.

So will Snapseed be part of a social network strategy? It's tempting to answer with a reactionary "yes," although that neglects the reality that Snapseed has zero social features. Google hasn't announced its rationale for buying Snapseed, other than senior vice president Vic Gundotra saying, "We want to help our users create photos they absolutely love, and in our experience Nik does this better than anyone."

Google as a professional-quality photo editing company? It sounds incongruous, but it's important to remember how widely Google has increased its sphere of influence since its search origins. Upon establishing itself as the definitive place to go for search, Google has become a video-sharing site (by buying YouTube) and a phone manufacturer (Motorola Mobility). Mapquest used to be the world's premier online mapping company, until Google entered and took over that business, too. In fact, Google is even a travel guide company (or did you miss its acquisition of Frommer's this summer?).

The Bottom Line
If you're big enough, it's easier to buy a subsidiary than to build one from scratch. By purchasing Nik, a relatively longstanding company that's known as a market leader and has a devoted clientele, Google has likely shown once again that it's more interested in forging its own path, than in playing catch-up to Facebook and Apple (Nasdaq:AAPL).

At the time of writing, Greg McFarlane did not own shares in any company mentioned in this article.

Related Articles
  1. Stock Analysis

    Net Neutrality: Pros and Cons

    The fight over net neutrality has become an amazing spectacle. But at its core, it's yet another skirmish in cable television's war to remain relevant.
  2. Forex Education

    China's Devaluation of the Yuan

    Just over one week ago the People’s Bank of China (PBOC) surprised markets with three consecutive devaluations of the yuan, knocking over 3% off its value.
  3. Investing

    The Rise of Corporate Venture Capital

    After the success of Google Ventures, corporate venture capital is an increasingly popular diversification and hedging tool for many large corporations.
  4. Personal Finance

    A Day in the Life of an Equity Research Analyst

    What does an equity research analyst do on an everyday basis?
  5. Investing

    What’s Plaguing Twitter and Yelp?

    Yelp and Twitter have recently become grounded in reality and unable to justify their sky-high stock valuations.
  6. Mutual Funds & ETFs

    ETF Analysis: PowerShares S&P 500 Downside Hedged

    Find out about the PowerShares S&P 500 Downside Hedged ETF, and learn detailed information about characteristics, suitability and recommendations of it.
  7. Mutual Funds & ETFs

    ETF Analysis: ProShares Large Cap Core Plus

    Learn information about the ProShares Large Cap Core Plus ETF, and explore detailed analysis of its characteristics, suitability and recommendations.
  8. Mutual Funds & ETFs

    ETF Analysis: iShares Core Growth Allocation

    Find out about the iShares Core Growth Allocation Fund, and learn detailed information about its characteristics, suitability and recommendations.
  9. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI USA Minimum Volatility

    Learn about the iShares MSCI USA Minimum Volatility exchange-traded fund, which invests in low-volatility equities traded on the U.S. stock market.
  10. Stock Analysis

    Should You Follow Millionaires into This Sector?

    Millionaire investors—and those who follow them—should take another look at the current economic situation before making any more investment decisions.
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Hard-To-Sell Asset

    An asset that is extremely difficult to dispose of either due ...
  3. Sucker Yield

    When an investor has essentially risked all of his capital for ...
  4. PT (Perseroan Terbatas)

    An acronym for Perseroan Terbatas, which is Limited Liability ...
  5. Ltd. (Limited)

    An abbreviation of "limited," Ltd. is a suffix that ...
  6. BHD (Berhad)

    The suffix Bhd. is an abbreviation of a Malay word "berhad," ...
  1. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  2. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  3. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  4. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  5. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>
  6. What happens to the shares of stock purchased in a tender offer?

    The shares of stock purchased in a tender offer become the property of the purchaser. From that point forward, the purchaser, ... Read Full Answer >>

You May Also Like

Trading Center

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!