After Facebook spent $1 billion on Instagram, one would think Twitter would try to buy a competitor of its own to keep pace. But that doesn't appear likely.
Twitter CEO Dick Costolo told reporters in Japan yesterday that Twitter has no plans to buy an Instagram competitor to keep up with Facebook. Quite the contrary, Costolo said that he plans to improve his company's application programming interface (API) to help third parties improve integration on the social network.
"I think that sometimes there is a tendency for companies to react to events in the marketplace that are inconsistent with their strategy....and I think that tendency is a mistake," Costolo said yesterday, according to The Wall Street Journal. Costolo went on to say that companies that start "copying" others with an acquisition tend to waste money.
Facebook made a splash in Silicon Valley last week after announcing plans to acquire photo-sharing company Instagram for $1 billion.
As Costolo pointed out yesterday, when similarly massive acquisitions have occurred online in the past, other companies have tried to respond by buying another firm in the given market. After Google acquired YouTube, for example, other prominent Web firms rushed to find suitable YouTube alternatives to pick up. When Google bought DoubleClick, Microsoft wasted no time to acquire aQuantive. In those cases, Google -- not its competitors -- won out with its respective purchases.
Still, Twitter can't be happy with the Facebook purchase. Instagram worked well with Twitter, and seemed to keep the social network's users heavily engaged. And although Instagram says it's "not going away," it's hard not to believe that Facebook will be getting preferential treatment.