Précis – In a bold move Facebook has forked out $1 billion to buy Instagram, a photo-sharing app that was started up less than two years ago, making it the largest ever acquisition made by the social networking site to date.
What? CEO Marc Zuckerberg announced that Facebook has reached an agreement to pay $1 billion for Instagram – a mobile photo-sharing app that allows users to modify photos - despite the smart-phone app generating no revenues and employing only 13 staff in total.
So what? Facebook astonished its followers and prospective investors when it paid over $500 million for a company (or to be precise, an app) which is less than two years old, has no revenues and employs only 13 people.
Instagram was Apple’s app of the year last year, and estimated that users uploaded approximately 5 million photos a day via mobile devices. Photo sharing is a central element of Facebook and the acquisition will be an addition to its photo-sharing feature.
The acquisition offers Facebook a step into the market for mobile computing which is fast replacing stand-alone computing or netbooks. In the past, Facebook has acknowledged that it has found it difficult to establish a grip on mobile devices, while Instagram has managed to amass a following of 30 million mobile users within a short timescale. In addition to getting access to better photo-sharing technology, the deal brings a significant user base.
More interestingly, it is also possible that Facebook has made a clever move in removing a potential competitor which could have threatened its potential prospects to dominate the social networking sphere.