What is the value of something?
Here’s Pete Warden with the best explanation for what Facebook gets in Instagram. Many commentators have gotten caught up in the comparison of valuations between the New York Times and Instagram (both $1bn). Don’t be fooled, this is deep stuff.
The best answer for what something’s worth is the amount of money you can make from buying it. To a pure trader, most everything is inherently valueless, they simply buy and sell assets to flip them. Economically, all they do is provide liquidity. Markets *really* work only when interested parties transact with heterogenous uses for the assets. One man’s trash is another man’s treasure.
To Facebook, Instagram is worth $1bn. To Facebook, the NYT is worth far less than $1bn because they would probably destroy quite a lot of value by buying it. To Microsoft or Yahoo! Instagram may well be worth a lot less than $1bn. Heck, Instagram may well not be worth $1bn to Facebook, either, but Facebook *thinks* it is at the moment.
And that’s as satisfying an explanation as you can get. Talking about an abstract “price” for something is nonsense.
Not Unreasonable 