Consolidation by the Internet Big Boys

Why did Facebook buy Instagram for $715m (http://goo.gl/vQoEB2) when Facebook already had the photo sharing functionality?  Why did Google purchase Waze (the social mapping app) for $966m (http://goo.gl/h7DqOi) when Google had already had a mapping product?  Both are well established parts of their respective companies product sets.

The answer is as the Internet matures into an everyday tool for every body to use, specialist niche tools are becoming more and more popular.

It’s the same phenomena as happened at the turn of the 19th century to the 20th century.  Electricity supply and products where the ‘hot tech’ items at the time.   There was an electricity bubble, in the same way at there was an internet bubble between 1998 & 2000. Lots of start ups entered the market, then there was significant consolidation in the market place to establish power houses (big players).

Once the big players are established they need to retain their position and acquire specialist successful niche companies.   This process is a continuum once the technology is established.  We are in that second phase now and expect that to continue, pretty much like every established sector.  A good example of this is Twitter’s acquisition of 31 companies (http://goo.gl/Q8nCqa); including Vine before it was launched.

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