Facebook has just finished a deal to
acquire mobile photo sharing app Instagram for
approximately $1 billion in cash and stock. Instagram will remain an
independently branded standalone app that’s separate from Facebook, but
the services will increase their ties to each other. The transaction
should go through this quarter pending some standard closing procedures
Last year, documents for a
standalone Facebook mobile photo sharing app were attained by TechCrunch. Now it seems Facebook would rather buy
Instagram
which comes with a built-in community of photographers and photo
lovers, while simultaneously squashing a threat to its dominance in
photo sharing.
![](https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgAXV5f55lONuhROPzt7SYifLjIpJd7dpQH_95h34JqbqotY9AzSVP_UzyWiirpgwnX9qQjxufyGvQrGivRTM1eUkqua40L3jjEweTJXDfZc27dWZ6vedn-t5A7-oFik2-Bx3gZTnFz4C0/s320/greed-money.jpg)
At 27 million registered users on iOS alone, Instagram was
increasingly positioning itself as a social network in its own right —
not just a photo-sharing app. And it was clear that some users were
doing more of the daily sharing actvities on Instagram rather than
Facebook’s all-in-one mobile apps, which had to be cluttered with nearly
every feature of the desktop site.
With the
Instagram for Android launch
last week, Instagram was going to get to 50 million registered users in
a heartbeat after racking up more than 1 million in the first 24 hours.
And with that kind of momentum, Facebook felt like it had to move —
fast. After all, photo sharing and tagging are arguably what *made*
Facebook.
Whatever you think of the price given the fact that Instagram had no
revenues, the reality is it was going to be worth whatever Mark
Zuckerberg felt like paying for it. Both Google and Facebook had
approached Instagram several times over the past 18 months, but the
talks clearly didn’t result in a deal. So Facebook was going to have to
offer a huge premium over the last valuation for Systrom and the board
to take any deal seriously.
[Instagram's founders from left, Mike Krieger and Kevin Systrom. Portrait by
Cody Pickens]
With the deal, Instagram will gain massive design and engineering
resources by joining forces with Facebook, a big change after running as
a famously lean company with just a handful of employees. Still, the
deal seems to let Instagram stay somewhat independent and maintain some
of its company culture. Instagram
CEO Kevin Systrom writes in a blog post, “It’s important to be clear that Instagram is not going away.”
This is a really big departure from the way Zuckerberg has historically run Facebook as a
single product.
He has always been insistent that everything feed back into Facebook
itself. Keeping Instagram as a separate product and brand is reminiscent
of what Google has done with keeping YouTube and Android as separate
fiefdoms within the company following their acquisitions.
Instagram’s investors included
Benchmark Capital, Greylock Capital, Thrive Capital and Andreessen
Horowitz, along with angel investors including Quora’s Adam D’Angelo,
Lowercase Capital’s Chris Sacca and Square and Twitter’s Jack Dorsey.
The early investors must be thrilled with the price. From our understanding, the
later investors, who put capital into the company at a $500 million valuation, seem happy with basically getting a 2X in a few days after the money was wired last Thursday.
Congratulations to Instagram’s founders Mike Krieger and Kevin
Systrom. You opened the world’s eyes to seeing art in everyday life, and
now Facebook has opened its doors to you. So in your honor, we’ve made
you part of the
TechCrunch home page logo.
More On The Instagram acquisition
From 0 To $1 Billion In Two Years: Instagram’s Rose-Tinted Ride To Glory
Right Before Acquisition, Instagram Closed $50M At A $500M Valuation From Sequoia, Thrive, Greylock And Benchmark
Facestagram: Five New Features Facebook + Instagram Could Launch
With Instagram Buy, Facebook Officially Pushes M&A Strategy Beyond The ‘Acqui-hire’
Insta-Backlash: Twitterverse Overreacts To Facebook’s Instagram Acquisition, Users Delete Accounts
–
Mark Zuckerberg posted the following
letter to his Timeline about the purchase:
I’m excited to share the news that we’ve agreed to acquire Instagram and that their talented team will be joining Facebook.
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.
We believe these are different experiences that complement each
other. But in order to do this well, we need to be mindful about keeping
and building on Instagram’s strengths and features rather than just
trying to integrate everything into Facebook.
That’s why we’re committed to building and growing Instagram
independently. Millions of people around the world love the Instagram
app and the brand associated with it, and our goal is to help spread
this app and brand to even more people.
We think the fact that Instagram is connected to other services
beyond Facebook is an important part of the experience. 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.
These and many other features are important parts of the
Instagram experience and we understand that. We will try to learn from
Instagram’s experience to build similar features into our other
products. At the same time, we will try to help Instagram continue to
grow by using Facebook’s strong engineering team and infrastructure.
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.
We’re looking forward to working with the Instagram team and to
all of the great new experiences we’re going to be able to build
together.
[Additional reporting by Kim-Mai Cutler, Image Credit: Max Woolf]