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April 13, 2012, 11:40 a.m.

This Week in Review: The fallout from Facebook and Instagram’s deal, and e-books’ unclear future

Plus: Microsoft buys up AOL’s patents, remembering Mike Wallace, and the rest of the week’s media and tech news and views.

Facebook scoops up Instagram: There were two billion-dollar deals in the tech world this week, and by far the bigger of the two was Facebook’s purchase of the photo-sharing app Instagram. Mathew Ingram of GigaOM has a good, quick roundup of initial reaction to the deal, but I’ll try to sort through each of the angles to the story, including what this means for Facebook, Instagram, and the tech world in general.

The first big question was why Facebook bought Instagram, especially for so much money. The most common answer, voiced most persuasively by GigaOM’s Om Malik, was that Facebook felt threatened by Instagram’s ascendance in mobile photo sharing, one area in which Facebook has struggled. Business Insider’s Nicholas Carlson explained why Instagram does mobile photos so much better than Facebook, and Fortune’s Dan Primack suggested that Facebook panicked at all the money Instagram has raised recently.

The New York Times also characterized the deal as a big move by Facebook into mobile media, but there were other key aspects at work, too: Ingram said Instagram’s value lay in its network, and Wired’s Tim Carmody said what matters to Facebook is Instagram’s personal data. Rackspace’s Robert Scoble outlined some of the specifics of that data, and All Things Digital’s Lauren Goode focused on Instagram’s location data. New York’s Paul Ford said Facebook is attempting to buy Instagram’s sincerity: “Remember what the iPod was to Apple? That’s how Instagram might look to Facebook: an artfully designed product that does one thing perfectly.”

So what does this mean for Instagram? TechCrunch detailed the company’s rise, and the big concern was, as CNN’s John Sutter put it, whether Facebook would “ruin” Instagram. Mashable’s Christina Warren urged Facebook to keep Instagram mobile-only and keep it separate from Facebook logins, and Jolie O’Dell of VentureBeat pointed out some of the good things Facebook’s developers could do for Instagram. TechCrunch noted that Facebook’s statement that it would keep Instagram as a separate product is a big departure from Facebook’s unified approach.

That concern over Facebook ruining Instagram indicates a certain revulsion for Facebook among Instagram users, something Om Malik took note of. Forbes’ John McQuaid said the sentiments reveal our uneasiness with the utility-like role tech giants like Facebook are playing in our new social world, and The Next Web’s Courtney Boyd Myers reminded Instagram users that the fact that they loved it so much was a big part of the reason it got bought in the first place.

The next question was for the tech industry as a whole: Does Instagram’s massive purchase price signal another tech market bubble? The Atlantic’s Rebecca Greenfield said it’s just time to accept the existence of a social media bubble, and the Guardian’s Charles Arthur said we may not be at the peak of inflated valuations, though also at the Guardian, Dan Gillmor said we could be near the end of the bubble. But Wired’s Andy Baio crunched the numbers and said Instagram wasn’t overvalued, and if anything, the tech market is rewarding efficiency. Forbes’ Robert Hof, meanwhile, looked at whether we’ll see more social media purchases soon, coming up with some reasons for a slowdown.

Finally, Poynter’s Jeff Sonderman looked at some of the ways journalists have used Instagram, and Reuters’ Jack Shafer put the deal in the context of the larger cultural shift from voice to text to images. “So, Instagram is here,” he said. “What I want to know is: Where is it going to take us?”

Apple, publishers, Amazon, and ebooks’ future: The ebook industry absorbed a blow this week when the U.S. Department of Justice sued Apple and five of the largest book publishers for antitrust violations involving price-fixing for ebooks. (Sixteen states also filed a lawsuit of their own.) Three of the publishers — Hachette, Simon & Schuster, and HarperCollins — immediately settled with the DOJ, and Wired’s Tim Carmody explained the terms of the settlement, which will undermine the model that the publishers created with Apple, though not kill it outright. Apple, Penguin, and Macmillan have decided not to settle, and the latter’s CEO issued a defiant letter in response to the suit.

PaidContent’s Laura Hazard Owen wrote a fantastic explanation of what the case is about, but in short, the issue centers on what’s called agency pricing, in which the publishers set book prices, rather than the retailers, and the books must be at the same price across retailers. In 2010, Apple negotiated an agency pricing model with the big book publishers for the rollout of its iPad’s iBookstore, and the DOJ objected to that as price-fixing.

The Verge’s Nilay Patel dug through more of the details from the lawsuit of the alleged price-fixing process, particularly its response to Amazon’s perceived ebook dominance. At the same time, however, as Peter Kafka of All Things Digital noted, Apple was allegedly considering a deal to divide and share rulership over online content with Amazon. A few people said the DOJ wasn’t likely to win the suit: Law prof Richard Epstein said the agency pricing arrangement has more social and consumer benefits than a classic collusion case, and CNET concluded that Apple should be able to win its case, too. Adam Thierer of the Technology Liberation Front put the strategy in the context of copyright challenges, coming out against the suit in the process.

Also this week, we found out that several of the big publishers have refused to sign their annual contracts with Amazon, as Salon’s Alexander Zaitchik reported and Laura Hazard Owen explained. The Seattle Times has been running a critical series on Amazon, which, as the Los Angeles Times pointed out, includes some real concern about Amazon behaving anti-competitively by selling ebooks for too little.

Publishers have argued that that’s why agency pricing is necessary: It’s the best chance to keep Amazon from undercutting publishers and laying waste to the book industry. Web thinker Tim O’Reilly said the government should be watching Amazon more closely than the five companies it just sued, but Nate Hoffelder of The Digital Reader defended Amazon, arguing that it’s helping enable an entirely new publishing model in its stead.

Christopher Mims of Technology Review said it doesn’t matter if Amazon becomes a monopoly. And GigaOM’s Mathew Ingram also said Amazon’s practices have been good for consumers and good for innovation, unlike those of the publishers: “They seem to have spent most of their time dragging their feet and throwing up roadblocks to any kind of innovation … Their defense of the agency-pricing model feels like yet another attempt to stave off the forces of disruption. Why not try to adapt instead?”

Microsoft’s big patent purchase: The other billion-dollar deal drew less attention, but could be an important one beneath the tech industry’s surface: Microsoft paid just more than $1 billion for more than 800 AOL patents, outbidding Amazon, eBay, Google, and Facebook for the intellectual property trove. The patents involve advertising, search, mobile media, and e-commerce, and includes the patents underpinning Netscape, as All Things D reported.

CNET’s Jay Greene and Stephen Shankland described a few of the more interesting patents potentially involved in the deal and pointed out that Microsoft’s work may have been closer to AOL’s than any other potential buyer. Dealbook’s Michael de la Merced characterized the deal as part of a “gold rush” on patents in the tech world. On AOL’s end, The New Yorker’s Nicholas Thompson worried that the money from the deal will go to appease shareholders rather than create new products, and ZDNet’s Andrew Nusca was also skeptical of the sale’s value for AOL, wondering why the company couldn’t take advantage of the patents itself. “To me, AOL’s decision to sell this part of the portfolio shows a lack of confidence in its ability to execute in these areas,” he wrote.

Remembering Mike Wallace: One of the most legendary figures in the news industry died last weekend — Mike Wallace, longtime journalist for CBS and 60 Minutes in particular. The New York Times has a definitive obituary, and CBS has some more personal remembrances. The Times also collected responses to Wallace’s death, in which he was remembered as a tough-minded reporter: The New Yorker’s Ken Auletta described him as a pioneer of investigative journalism on television. Likewise, New York’s Matt Zoller Seitz gave a thoughtful appreciation of Wallace’s “informed showmanship”: “He was our stand-in, asking the questions that we might have asked if we were there and had his skill and nerve.”

Others had more personal stories: The legendary investigative reporter Seymour Hersh, longtime Philly television columnist Gail Shister, j-prof Dan Kennedy, and The Wrap’s Sharon Waxman. As Kennedy wrote: “I really do think there was a golden age of television news, and Wallace was right in the middle of it.”

Reading roundup: Plenty of other interesting pieces to keep up with this week:

— A few more takes on last week’s purchase of the Philadelphia Inquirer and Daily News by a group of local investors: The New York Times’ David Carr mused on the return of the newspaper baron, the American Journalism Review’s John Morton examined the recent spree of newspaper purchases in a downtime for the industry, and Penn prof Victor Pickard argued for more systemic solutions to save papers like Philly’s.

— A couple of interesting pieces from the academic view of journalism: NYU’s Jay Rosen and MIT’s Ethan Zuckerman talked about trends in journalism at an MIT forum (summarized well by Matt Stempeck), and CUNY’s C.W. Anderson talked a bit about his research on data journalism to Tyler Dukes of Reporters’ Lab.

— The debate over the value of online commenting continues: Animal’s Joel Johnson proposed that comments are worth far less than publishers think, because they don’t draw many readers and don’t make money, but GigaOM’s Mathew Ingram countered that comments are an important check on online authority and that not allowing them tells readers to “go away.”

— News analyst Alan Mutter made the age-old argument that newspapers are failing in their digital efforts in a brief, potent piece decrying newspapers’ poor digital products and weak competitive response, and urging them to pool their efforts.

— Finally, Digital First Media’s Steve Buttry wrote a gracious but no-nonsense letter to newsroom curmudgeons defending digital journalism practices, then wrote about what he learned from its fallout, then addressed the role of news organizations themselves in enabling curmudgeonhood. The posts and comments are a good glimpse into the current state of newsroom culture and change.

Facebook/Instagram logo by Karl Nilsson, iPad photo by Luiz Filipe Carneiro Machado, and old CBS Radio ad by Nesster all used under a Creative Commons license.

POSTED     April 13, 2012, 11:40 a.m.
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