Facebook to buy Instagram for $1 billion [Updated]

[Updated below with more details and background.]  Facebook just announced a deal to buy Instagram, the popular photo-sharing service with apps on iPhone and Android, for $1 billion in cash and stock.

“We think the fact that Instagram is connected to other services beyond Facebook is an important part of the experience,” says Facebook CEO Mark Zuckerberg in a post describing the deal. “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.”

Instagram made its mark on the iPhone and just expanded to Google’s Android mobile platform last week. The service reported more than 27 million registers users as of a month ago, up from 15 million in December.

Zuckerberg writes, “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. 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.”

Throughout its history, Facebook has grown organically rather than through acquisitions, buying up smaller companies usually for tech talent. In fact, according to this list on Wikipedia, the most Facebook previously paid for a company was about $70 million.

The Instagram deal also comes at a critical time as Facebook preps for its initial public offering, expected to occur on Nasdaq later this year. The social networking powerhouse is looking to raise up $5 billion in what would be one of the largest Internet IPOs of all time.

UPDATE: Instagram CEO Kevin Systrom issued this statement today on the company’s blog.

When Mike and I started Instagram nearly two years ago, we set out to change and improve the way the world communicates and shares. We’ve had an amazing time watching Instagram grow into a vibrant community of people from all around the globe. Today, we couldn’t be happier to announce that Instagram has agreed to be acquired by Facebook.

Every day that passes, we see more experiences being shared through Instagram in ways that we never thought possible. It’s because of our dedicated and talented team that we’ve gotten this far, and with the support and cross-pollination of ideas and talent at a place like Facebook, we hope to create an even more exciting future for Instagram and Facebook alike.

It’s important to be clear that Instagram is not going away. We’ll be working with Facebook to evolve Instagram and build the network. We’ll continue to add new features to the product and find new ways to create a better mobile photos experience.

The Instagram app will still be the same one you know and love. You’ll still have all the same people you follow and that follow you.You’ll still be able to share to other social networks. And you’ll still have all the other features that make the app so fun and unique.

We’re psyched to be joining Facebook and are excited to build a better Instagram for everyone.

UPDATE 10:45 A.M. We reached out to Jason Karas, CEO of Seattle mobile photo application Trover, to get his sense on the deal.

“What’s powerful about the acquisition is that Facebook is buying a new, complementary form of social network,” said Karas.  “Instagram is an open network that brings people together around passions and interests regardless of previous social ties.  Its a very different curve, and one that has the potential to grow Facebook in radically new ways. More obviously, it’s a move that highlights people’s boundless desire to share their activities and interests via mobile photos, and their appetite for building new social relationships around them.”

UPDATE 10:55 A.M. This makes the deal even more intriguing. TechCrunch is reporting that Instagram raised a $50 million venture round at a $500 million valuation from Sequoia, Greylock and Benchmark last Thursday, meaning that investors doubled their money on the deal in just three days. Word of that deal was first reported on April 6th by All Things D.

 

  • http://www.intrinsicstrategy.com/ FrankCatalano

    One question is whether Facebook is buying the Instagram product, or the detailed usage information on millions of Instagram users it can merge with Facebook data, or both. It could have bought another or developed its own mobile photo sharing app. I suspect the user base and data have the most value in this deal.

    • Guest2

      Precisely.
      It’s about the metadata associated with each Image; which the average user is entirely unaware they are sharing.  Just open up the PROPERTIES/Details of any Instagram image.

  • Guest

    On what strange planet is Instagram worth $1 billion? Good to see that nothing was learned from the dotcom fiasco and paying too much for today’s flavor of the week is alive and well.

  • Guest

    Barfff

  • Joe M.

    Somebody feels threathened by Pinterest.

  • http://www.christopherbudd.com Christopher Budd

    I have to admit this is a head scratcher.

    Since they’ve been iPhone only until last week I haven’t even been able to play with it so I don’t even know why someone would use Instagram.

    But a billion dollars for a nearly exclusively iPhone only user-base seems, uh….excessive.

    Of course, if Facebook is moving into aggressive acquisition mode, bets on if they scoop up  Yahoo?

  • Guest

    Congratulations to Instagram on a hugely successful exit! We believe that Instagram will be an excellent app to draw customers to Facebook Phone when it launches next year.

  • Andrea James

    This probably isn’t the forum for this but whatever.

    I want to install Instagram. I go to Android Market. I do a search on “Instagram.” I get 667 results. None of them are Instagram.

    (Tell me how it is possible that Google’s OS app market has lousy search?)

    I go online using my PC. I find Instagram for Android, at the Google Play site. It lists all the apps I’ve installed on my Android device. I click, “install.” It gives me some vague error that I don’t understand, followed by the words “Learn more,” which link to a broken page.

    My options are “OK,: which closes the dialog window (effectively cancelling the install) and “Cancel,” which also closes the dialog window.

    Anyway. All I can think is of your Epic Bill Gates rant, which he wrote in 2003 and you published in 2008, flaming the Windows team for usability issues. Larry Page needs to send a similar email now to the Android team.