NEW YORK ( TheStreet) -- Facebook could have bought a photo sharing site on the cheap.
Instead, the social network flexed its pre-IPO financial muscle in a $1 billion acquisition of photo-sharing app Instagram.
The bargain photo sharing deal went to Shutterfly (SFLY), which on Wednesday said a $23.8 million bid it made in March for Kodak Gallery, the pioneering photo sharing service from the bankrupt camera inventor Eastman Kodak, was the winning bid. There were no competing offers.
The divergence in the valuation of Kodak Gallery, an established and profitable business, and Instagram, a two-year old company with no revenue, shows that in some Silicon Valley circles, growth potential trumps the financial performance of a proven business model.While Kodak Gallery is a photo storage and album-creating site with 75 million users and iPhone and Android-apps that connect to Facebook, it was Instagram's smaller, but fast-growing mobile app-oriented social network that Mark Zuckerberg targeted in a deal that was roughly 42 times more expensive. Amid Facebook's rise and Kodak's collapse, the lack of interest in Kodak Gallery may also signal just how specific M&A needs are as social networking giants and Silicon Valley titans work to follow consumers into mobile products and round out user experiences. For Shutterfly, Kodak Gallery may bolster its photo sharing capabilities in an opportunistic move that wards off prospective competitors such as Apple (AAPL), and social networks threatening its profit margins.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV