There’s a part of me that understands and applauds Facebook’s purchase of Instagram.  Instagram is cool! No doubt about it.  If a picture is worth a thousand words, I understand why Instagram is worth a billion dollars even if there’s no revenue and the burn rate is massive.  I’ve tried calculating just the cost associated with storing that much data and haven’t yet come to any conclusions.  With a subscriber base that has grown to 30,000,000 users over the past 18 months that assuming, on average, each post 100, 5MB files at a bare minimum with a cost of $0.10 per GB, that’s about $1.5M per month.  This was a purely defensive move on Facebook’s part to ensure that photo sharing happens under the auspices of its watchful eye.  I would guess that in the near future, Instagram will be fully integrated into Facebook.

Going beyond this move, I read an article in today’s edition of the Los Angeles Times (April 13, 2012) about Pinterest (,0,6102779.story) and the momentum popularity it is gaining.  This seems like another defensive target for Facebook based on the user interface and concept behind creating groups of people that post collections of “things” that they like.  The “things” range from products to recipes.  Here’s another example of a service that doesn’t appear to have any revenue, but a big burn rate.  Not that this is a bad model for its creators because it’s clear that if the exit strategy is to sell the service and site to a larger company, this is a successful business model.

But the question is really, “Is the model a successful and sustainable business model that actually creates a regular revenue stream?”  Does it create commerce?  Or does that even matter anymore?  We exist in an economy that produces nothing tangible any longer, except for automobiles and a few other tchatchkes (  If we produce chatter, dialogue, social interaction and communications, does this really substitute for real business where money is exchanged for services? 

On the back end of this arrangement, money is changing hands.  The service providers (colocation, managed services, cloud-providers) are definitely profiting and that’s a good thing.  That’s part of the expense for the application company, in this case, Pinterest.   Advertisers are racking their collective brains to figure out how they can use Pinterest to their advantage in promoting their products.  In the end, a viral methodology of “Like-ing” will probably unfold, which will add to the arsenal of tactics now employed.  Or maybe, the true value of this social media just can’t be fully tabulated.