Ducati Worth Slightly More Than Instagram
Instagram, the popular photo sharing service, was bought by Facebook for $1 billion, despite not producing any tangible goods or generating revenue. Ducati is all but set to be purchased by Volkswagen for $1.12 billion, while producing tens of thousands of premium motorcycles sold across the globe ad fielding one of the most prestigious brands in the transportation industry.
Ducati has long been the apple of VWs eye – more specifically, VW boss and Ducati owner Ferdinand Piech has long coveted Ducati as a rival to BMW Motorrad. Analysts say there is very little synergy between VW and Ducati, but the purchase makes sense in light of VWs habit of buying luxury brands at cut rate prices. Or Piech is just a profligate mad man. I’m not sure.
More by Derek Kreindler
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I fail to see what the purchase brings to either party. Perhaps Ducati needs some deeper pockets to finance R&D but what's in it for VW? Is it just to fill in that empty space in the Piech family collection, so they can claim to be involved in all wheeled vehicles from motorcycles to earth-moving equipment? Graco better watch out - VW doesn't yet have a presence in the baby stroller market.
Lots of car companies have motorcycle divisions, or at least make both cars and motorcycles: BMW, Honda, Suzuki -- Fuji is partnered with Polaris, though doesn't own them. I think it can work out OK. VAG has done a fine job of allowing for brand identity within its group, and poured money into brands that can't possibly be profitable -- hello? Bugatti? -- but I wonder if maybe Fiat wouldn't have been the better suitor. Motorcycles are a lower-margin product than cars, but buying a luxury brand means you get the value of the trademark as well, and product-development in motorcycles is not as long or as complex as it is for cars. Harley financed its way back from AMF oblivion by licensing the logo and selling HD swag, then poured that money back into the manufacturing facility and product development. And then they marketed the bikes to dentists rather than to reprobates and turned the company into a profitable enterprise. You could do the same with Ducati: Ducati-branded riding gear, Ducati-branded helmets and boots, and an expanded motorcycle lineup to compete with BMW Motorrad on all fronts would make sense. Buy it for a billion, expand the dealer network and the product lineup while licensing the brand and you have a bigger company with bigger market share in maybe five years. Ducati also appeals to a younger rider than Harley, and BMW has been targeting that demographic as well.
Pretty sure that Ducati also loses a hell of a lot more money than instagram does. And since when do products have to be physical for them to be valuable? Was Microsoft a joke too because they made software? How is being a software company not producing something of value, and for that matter how is an overpriced luxury motorcycle brand more useful to anybody than photography software? I don't think Instagram is really worth a billion dollars, but then again it's probably more useful to the world than luxury-priced motorcycles. And anyways, they paid a bajillion dollars for instagram because unlike Ducati, Instagram has millions upon millions of customers.
I was hoping someone would buy Ducati that would give me confidence in owning one, but vw/audi... I don't think its fair to get down on instagram and the younger generation because of the price the company sold for. Sure they don't make motorcycles but instagram is a phone app, its not something you stay at home and use, its not a video game. Instagram got something like 10 million new users in 2 weeks when it became available on Android, I think Facebook was running scared to a point. Instagram is probably one of the most popular social apps there is. BTW instagram is the perfect place to show off your Ducati to your friends, I have a picture of my Honda on it.