Instagram the new Kodak? WhatsApp the new Ma Bell? Really?

Instagram is the new Kodak! So say respected public thinkers and pundits. A fifteen-person company has rubbed out a 147,000-person company. It’s the end of honest work and middle-class life. We’ll be all sitting in coffee shops delightedly sending selfies to each other.

Now Facebook is sinking tens of gigadollars into a 70-person company called WhatsApp. The argument goes that hundreds of megapeople use this WhatsApp to communicate with each other. It’s the end of telephony. It’s all shrunk into one floor of an office park on the edge of some town.

This of course is rubbish. Instagram is not Kodak.

Movie-Reel-In-Blue-LightWhat did Kodak do? They provided an imaging infrastructure product line. Anybody could use it to make and share images. I could capture images I believed were interesting and attempt to get you to believe the same. Of course, so could Metro-Goldwyn-Mayer. Without Kodak (and other imaging companies) I would have had to make drawings, and MGM would have been putting on stage plays.

What was cool about those imaging products? What was excellent about all that film, and chemistry, and equipment? It worked. It was beautiful. And, from a manufacturing business perspective, it was consumable. Customers ran out and had to order more. When MGM released a movie in 500 theaters at the same time, they had to buy three miles of film for each theater. After a theater showed that movie a few thousand times they had to get a new print, which meant Kodak (or maybe Technicolor) sold them another three miles of film and some more tank-cars of chemicals.

sd_cardInstagram is not Kodak. Not even close. Instagram is more like MGM. Both Instagram and MGM make use of generally available imaging infrastructure products to create popular, and therefore valuable, services. Instagram’s imaging infrastructure is smartphone cameras and data networks. Companies like Foxconn (Apple’s contract manufacturer) and Intops (one of Samsung’s contract manufacturers) are the people who make the equipment. Companies like Vodaphone, T-Mobile, Verizon, and Sprint provide communications. Companies like Toshiba and Seagate provide the image storage (the nearest equivalent to film).

Kodak isn’t hollowed out because Instagram ate their lunch. Kodak is hollowed out because the imaging infrastructure doesn’t use consumable products any more.  Not one part of the Instagram signal chain permanently consumes anything except electricity.

On to WhatsApp.  Is it really a global replacement for the telephone system? No, certainly not. It is built on the global telecommunications infrastructure. It’s convenient for end-users, and it circumvents costly and inefficient legacy voice-call pricing. WhatsApp’s inventors are in a good position because of their timing. Arthur Clarke predicted a half-century ago that the cost of voice telephony would fall to zero by now. The WhatsApp people got there first because the telcos couldn’t get out of their own way.

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