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Why Facebook is splashing $1 billion on photosharing app Instagram (born Oct 2010)


By Noel Young | Correspondent

April 9, 2012 | 4 min read

Facebook surprised the business world yesterday with a billion-dollar buy. Instead of waiting for its initial public offering expected next month, it is shelling out around $1 billion to buy Instagram, a photo-sharing application , launched just 18 months ago.

Instagram: value doubled in a week

Paul Kedrosky, author of the Infectious Greed blog, told the BBC: "I understand Instagram has 13 employees - so at $77m a head that makes it the most expensive business deal in history that I can think of."

The purchase in cash and stock is the social network's largest buy so far. Previous acquisitions have been worth less than $100 million.

The Instagram app, launched in October 2010 is free and allows users to apply 17 filters to their pictures to give them a different feel - before they are uploaded.

It has been hugely popular, particularly with mobile users. It is the most poplar Apple app with more than 30 million users uploading 5 million new pictures every day.

With Instagram, Facebook will get "a formidable mobile player – an area that is seen as a weakness for the sprawling social network," says the New York Times.

The intention is to run Instagram as an independent service. . Just last week Instagaram released a version of its application for Google’s Android operating system .

Facebook chief Mark Zuckerberg on his profile page, said Instagram would continue to work with rival social networks. That will allow users to post on other services, follow users outside of Facebook, and to opt out of sharing on Facebook.

“For years, we’ve focused on building the best experience for sharing photos with your friends and family,” Zuckerberg said .

“Now, we’ll be able to work even more closely with the Instagram team to also offer the best experiences for sharing beautiful mobile photos with people based on your interests.”

On Instagram’s Web site, CEO Kevin Systrom, said he looked forward to leveraging the new parent company’s resources and talent.

With Facebook preparing for its IPO, most likely next month, why the rush?

The NYT explains, "Instagram’s surging momentum likely compelled the social network to swiftly put together the billion-dollar offer.

Last week, Instagram closed a $50 million financing round with several prominent investors.

That funding round reportedly valued Instagram at about $500 million, Facebook’s purchase, one week later, means that investment has now doubled in value.

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