Facebook buys Instagram for $1billion

Facebook will acquire photo sharing app Instagram for US$1 billion, it was announced today. Facebook CEO Mark Zuckerberg shared the news on his blog this morning, and in just four hours the article had attracted 100,000 likes.

The acquisition is by far the largest ever for Facebook, with the $1 billion investment to be made up of cash and shares.

It is also an unbelievably good result for Instagram, a developer just two years old. The developer launched their app in January 2011, and has since attracted 30 million users.

Despite the dramatic rise, Instagram still employs only a dozen people, according to ITNews. And as part of this groundbreaking deal, the team will join Facebook.

Already speculation is mounting as to why the world’s largest social network would shell out $1 billion for this acquisition.

To begin with, the news comes ahead of its initial public offering, expected next month. Business Insider sees today’s news as an important demonstration of the company’s ability to acquire related start-ups.

Some commentators such as ZDNet believe that the purchase will help Facebook to monetise mobile, a glaring absence in its revenue possibilities up until the recent announcement of its mobile advertising play.

Another view is that Facebook saw Instagram’s assets are better off in their hands rather than adding to the value of rival social networks such as Twitter, as well as helping them to compete with photo network and flavour of the month Pinterest.

Whatever the reason, this is one of the biggest social media plays so far, with more sure to come by the end of the year.

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