Facebook buys Instagram photo-sharing app for $1bn

The deal, which Facebook says is intended to improve its own mobile apps while leaving the 18-month-old Instagram 'independent', works out at $77m per employee

Facebook plans to buy Instagram, maker of the popular mobile photo-sharing app of the same name, for a billion dollars in cash and shares.


Facebook has announced plans to snap up Instagram for $1bn, shortly after the photo-sharing service launched an Android app. Image credit: Instagram

The deal, which works out at £631m, is expected to close later this quarter, the social-networking company said on Monday. In a statement, Facebook chief executive Mark Zuckerberg hinted that the acquisition will help shore up a relatively weak point in his company's product line.

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

"This is an important milestone for Facebook because it's the first time we've ever acquired a product and company with so many users," he added. "We don't plan on doing many more of these, if any at all. But providing the best photo-sharing experience is one reason why so many people love Facebook, and we knew it would be worth bringing these two companies together."

Instagram was only launched 18 months ago, and just one month ago it was valued at $500m. It has 13 employees, so Facebook's valuation works out at around $77m per employee. Facebook itself is getting ready to float onto the stock market, with a $5bn IPO expected to happen in May.

Photo sharing

Mobile photography has become increasingly viable in the last few years, as smartphone cameras have improved.

This is an important milestone for Facebook because it's the first time we've ever acquired a product and company with so many users.

– Mark Zuckerberg, Facebook

While Facebook has long provided tools for mobile photo-sharing, its smartphone app does not offer much in the way of photo augmentation. Instagram was one of the first smartphone apps that made it easy to apply 'retro' filters to mobile photos, to make them appear more interesting.

The previously iPhone-only service released an Android version last week, scooping up a million downloads in the first day and a total of five million over six days. The iOS version had already amassed 30 million users.

While some analysts have suggested Facebook is aiming to scoop up these users through the purchase, they are mistaken, argues Gartner analyst Ray Valdes, who pointed out that many Instagram users will also have accounts on the social network. Instead, he believes the company is making the "eye-popping" purchase to keep Instagram out of the hands of a rival, he told ZDNet UK's sister site ZDNet Australia.

"Facebook is at the top of the heap of the social web," Valdes explained. "There are others that want to unseat them, but no one else has all the pieces. Instagram would have been a weapon in someone else's arsenal."

According to Zuckerberg, Facebook wants to use the experience of Instagram's employees to "build similar features [to those of Instagram] into our other products". He said there were no plans to merge Instagram into Facebook, as the larger company was "committed to building and growing Instagram independently".

Instagram chief executive Kevin Systrom, writing in a blog post, was quick to reassure the mobile app's fans that the software will still allow sharing on Twitter and other rivals to Facebook, a sentiment echoed by Zuckerberg.

"We plan on keeping features like the ability to post to other social networks, the ability to not share your Instagrams on Facebook if you want, and the ability to have followers and follow people separately from your friends on Facebook," Zuckerberg said.

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