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.
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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.
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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.
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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.
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