[dirtyaura]

Google bought YouTube for $1.65B when YouTube didn't have business model. It was critiqued a lot because of this, but it established Google as a dominant player in video space and it's ripest fruits might be seen in coming years when media consumption moves more and more to mobile.

I grant that $1B sounds a lot for Instagram and it is harder to see similar commercial value in photos than in videos.

My personal take is that in addition to friend connections, already posted photos could be the strongest lock-in for users that Facebook has against future competitors.

[unreal37]

Trust me, Youtube is very profitable. Major multi-national brands have to pay $100,000's in Google Adword purchases to have their own branded channel. And if you want to change the look of your channel? Pony up another $100K.

[avree]

YouTube just recently turned profitable in the last two years. It was hugely unprofitable with an unproven business model at the scale at which it was bought.

[zbuc]

It is very profitable now, however it wasn't when the purchase was made -- therefore it was a wise decision.

[cpeterso]

YouTube has a business model now, but is it a profitable business unit? (I'm not trolling; this is a serious question about business models.)

[knowsnothing613]

yeah, and Yahoo bought Flickr for hundreds of millions. And Flickr never became a profit center for yahoo. Now, Yahoo is laying off thousands of workers, and is close to dead poool, because of all its malinvestment in web1.5 (flicker, geocities, delicious, etc).

Video has a higher value proposition than photos. Look @ how hard flickr has struggled turning photos into a sustainable business model.

I'm comparing apples to apples. You're comparing apples to oranges.

[lucasgonze]

Flickr was in the tens of millions, on the order of $30 million. That was the blog buzz around the price, anyway.

[tirrellp]

Gonze! How are you my man?!