Look, I’ve always derided pundits in the past for being trigger-happy on the “we’re in a bubble” talk, but when you objectively look at the tech sector today and two major acquisitions making headlines, you have to be blind not to notice that everyone’s drinking the same Kool-Aid.

We had a major debate about the acquisition news this morning in the SiliconANGLE editorial chat room, but I threw out a few questions regarding the acquisition that no one had a ready answer for. I’ll use them as a launching point to discuss the topic today

1) Would it have cost Facebook $1b to devote an engineer or eight to replicate the functionality of Instagram?

Obviously not. Let’s say Facebook is paying twice or three times the average salary ask I see for iOS developers online, and it costs $375,000 to employ an engineer who can write for iOS. Instagram had an eight-person staff size. The salary requirements to replicate that staff would run about $3 million a year.

Let’s say that Facebook wants to accomplish what Instagram did in a 10th of the timeline, so they throw 80 over-paid engineers at the project; that’s still only $240,000,000 a year.

Would it really take 80 Facebook engineers to develop and deploy a well produced application that utilized Facebook’s photo app functionality, and added sepia filters? I think the obvious answer to that is no, and the evidence I have for that are the sheer number of knock-off competitors there are for Instagram on every mobile platform marketplace.

2) What would it have cost Facebook to promote the heck out of their alternative on the sidebar of their site to users of Instagram (FB knows who they are).

Since it costs nothing for Facebook to put ads for services they already own on their own site, the obvious answer to this question is $0. When I posed this question to the editorial chat room, John responded with the question: “What would it cost facebook in lost revenue to promote an alternative?”

So I did some math using Facebook’s “Sponsored Story” gimmick, the tool used to put ads in the right hand sidebar of Facebook. When you target just the users of a single app, the best I can tell, the cost is about $.69 per click-through. I ran that value through a formula based on the following constants: click-through to signup for a mobile install and new feature would be around 10% to 5% of all clicks, and that there are currently around 30 million registered users on Instagram.

($.69 / click) * (30,000,000 users) * (.1 – .05 CTR)

This formula yields a cost to acquire the entire userbase for Instagram of $136 million to $680 million. Again, this is likely the largest this number could possibly go, since what Facebook would realistically be advertising is an add-on feature very comparable to the added Skype functionality to pre-existing Facebook chat, and it also assumes that 100% of that ad inventory would have been sold, which is far from guaranteed.

3) Will FB ever recoup $1b out of the purchase of Instagram? Ever?

The clear answer here, at least in terms of direct monetization, is no. Facebook has yet to do any monetization on their own native applications yet, as Robert Scoble pointed out today, so the likelihood that they’ll get around to monetizing their new bauble before the main application is next to nil.

The blogosphere is just chock full of ways that Facebook to justify the price tag here; I’ll be honest, most of these justifications sound about as plausible as the average crackhead’s explanation why he just needs you to give him a dollar.

For instance, Om Malik claims that “Facebook was scared shitless and knew that for the first time in its life it arguably had a competitor that could not only eat its lunch, but also destroy its future prospects.”

As a brief aside, it’s worth mentioning that Tom Anderson (“MySpace Tom”) posted this theory to G+ an hour or two before Om, and it was as ridiculous then as it was when Om said it.

Instagram has 30 million registered users, which means that their active user base is much smaller. Granted that web traffic isn’t entirely indicative of mobile traffic, but all public quantifications show their website registering less than 650,000 unique visitors a month.

This means either one of the following two things are true: Instagram’s userbase has horrible engagement, or Instagram’s user retention is horrible.

Whichever is the case, Facebook has 845 million users. If it isn’t crackhead logic to think Facebook was threatened by this, I don’t know what is.

So what could possibly possess Facebook to waste $1b just prior to IPO?

One of the popular theories that keeps getting trotted out is that the cache and brand value associated with Instagram is worth its weight in gold.

This is a theory that doesn’t fly with me, either. The main attraction to Instagram is the same attraction to Apple products: they instill a feeling of elitism in their users. The difference between Instagram and Apple is that Apple has solid tech and innovation behind it to keep their users, where Instagram is a paper tiger that can be and has been been knocked off by dozens of tech teams.

As Esteban Contreras tried to explain to me on Facebook last Friday, the value of Instagram isn’t the app or the functionality, it’s the community.

If that’s the case, then Facebook has truly wasted money, since the community truly hates Facebook.

Others, like Dan Frommer, claimed that it wasn’t the community that made Instagram so valuable, it was the ease of sharing.

The biggest threat to Facebook is a mobile-only or mobile-first social network that captures the increasing amount of time spent on smartphones in a way Facebook can’t or doesn’t.

In my experience, that’s exactly what Instagram does. I’m still addicted to Facebook on the old desktop-browser web, but when I’m on my phone, I gravitate to Twitter and Instagram. Path is another example, but Instagram is more developed — that’s the deal I’d make, too.

Now, the last time I checked, whenever I take a photo in any smart phone, when it’s time to share the photo I have a number of options available to me – almost too many options (which is part of why I never installed any of these photo-sharing-specific apps; I want my share button list kept simple). What Frommer and other pundits are trying to say with this logic is that it’s easier to find Instagram on a list of sharing options than it is to find Facebook on that same list.

Facebook Didn’t Buy Instagram, They Bought VC Loyalty

As much as it pains me to say this, Robert Scoble is the only pundit that came up with a theory that didn’t insult my intelligence in a response to a question on Quora, where he threw some spitballs to peg why Facebook ponied up $1b.

Most of his answer mirrored some of the other garbage on the web today, but one part struck a chord:

Instagram will let Facebook develop a new kind of Open Graph advertising. One where Facebook will be able to offer mobile developers a lot of money in return for opening their apps up to Open Graph. Venture Capitalists in Silicon Valley are slobbering over this new potential revenue stream, so having lots of VC buyin (they just got a nice payday) will be very important. Imagine that Benchmark now “asks” all of its member companies to support such a new advertising scheme? This could result in billions of revenues for Facebook and member companies.

I’ve embarrassed myself over-estimating Facebook’s ingenuity before (see my predictions on Project Beacon prior to release in 2008 for evidence of such). Still, Instagram had nothing if not a pantheon of investors in the Valley. If you were to bribe nearly every investor in the Valley, $1b is a cheap pricetag for that.

Given that the mobile content consumption revolution shows no signs of slowing (last numbers I saw showed 29% of all content was consumed via a mobile device), Facebook needs a monetization strategy to compete with giants like Millennial Media, Google and Apple.

It doesn’t necessarily need to even be a mobile monetization strategy that Facebook is working on – just some sort of product that requires adoption by Valley startups where the value proposition isn’t obvious to entrepreneurs.

Think about it, though: what better way to gain instant wide-spread adoption than to have every Valley VC lean on their investments to adopt the Facebook monetization platform? Can you think of a quicker route?

[Editor’s Note: Cross-posted on rizzn.com. –mrh]