• by Mike Bloxham , Op-Ed Contributor, April 11, 2012

In yesterday’s MediaPost "Social Media Insider," David Berkowitz eloquently wrote of the recent purchase of Instagram by Facebook under the headline “Facebook Acquires Itself.”

I recommend reading the article as it neatly summarizes why the purchase is less about the innate properties and value of Instagram, than about the fact the purchase was basically a defensive move on the part of Facebook.

One can discuss the merits of Instagram till the cows come home and the subject of its market value would carry the debate long into the night.  But market value isn’t the issue here -- it’s all about Instagram’s value to Facebook.  Or more accurately, the cost of allowing it to continue.

Not only is there the potential threat of a purchase by Google, Apple or one or two others, there is also the simple fact that Facebook has been remarkably slow to really capitalize on the fact that people continue to add more and more of their pictures to the billions the network already holds.

I’ve no idea how many pictures are uploaded per minute, but its clearly a huge number. Yet it’s only relatively recently that Facebook has made any effort to reflect the obvious importance those pictures hold for users in the kind of user experience it offers.  As a result -- and as David points out -- Instgram has stepped in and claimed some of that space. Not much, but enough to be a potential threat.

But beside the defensive value that Instagram represents to Facebook (or to look at it another way, the cost of neutralizing a threat the company itself allowed to emerge) there is a more mundane reason that justifies the purchase.

It’s the looming IPO.

Facebook sits on a lot of cash and that’s not what the investment community likes to see. Capital is something to be utilized in the pursuit of value creation. While some of that can be focused on R&D and refining the product, it’s difficult to sell the investment community on a strategy that is insufficiently acquisitive.

Being seen to make acquisitions that are clearly newsworthy and can be readily spun as a value-add for the business is a very smart move in itself. (And it's close enough to the IPO itself to ensure there will be no unraveling of the rationale before the shares are greedily swallowed up by the markets.)

The fact that Instagram also heads off some potential problems for Facebook down the line is also a tick in the IPO box -– even if you do think those potential problems stem from the company being slow off the management mark, pardon the pun.