Facebook Buys Instagram for $1 Billion


Following repeated speculation over Instagram’s financial viability, Facebook has today acquired Instagram for $1 billion. The Facebook press release reads:

Facebook announced today that it has reached an agreement to acquire Instagram, a fun, popular photo-sharing app for mobile devices.

The total consideration for San Francisco-based Instagram is approximately $1 billion in a combination of cash and shares of Facebook. The transaction, which is subject to customary closing conditions, is expected to close later this quarter.

The news comes mere weeks after Instagram closed a recent round of funding in which the fledgling company attained a valuation in the neighborhood of $500 million. Many viewed such numbers cynically, regarding the astronomic success of a penniless, app-centric startup as resounding evidence of a resurgent technology bubble.

Personally, in spite of its distinct lack of monetization, I have often gone on the record in support of Instagram and its long-term viability. In my eyes, targeted social networks are representative of the future of social networking. Path, Instagram, and Pinterest, for instance, all excel at their central conceits, rather than attempting to catch all. As I wrote two weeks ago:

From my perspective, it is not a question of which specific social network will usurp Facebook’s position, but what combination of them will. Pinterest coupled with Twitter, Path, and Instagram allows for a fairly broad social landscape — one that is interconnected and one that excels in far more areas than Facebook might attempt. The rise of powerful APIs characterizes an environment in which competitors may achieve a loose form of connectivity without the need for directly absorbing functionality. In this environment, the all-encompassing mediator, Facebook, is unnecessary.

Evidently Facebook has recognized the threat therein.

Regarding the acquisition and any potential affect it may pose for the current Instagram service, Instagram CEO Kevin Systrom has written on Instagram’s official blog:

It’s important to be clear that Instagram is not going away. We’l 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.

Boasting a rapidly growing userbase — particularly following the app’s expansion to Android last week — the acquisition certainly makes sense for Facebook. In the face of Facebook’s slowing growth and peaking expansion, the social networking giant has been forced into introverted reflection in an attempt to sustain the interest of its users. Simply put, with greater interaction lies increased opportunity for advertising.

The acquisition does not bode well for the integrity of the Instagram service and may, I imagine, prompt a rather quick abandonment of the app by die-hard users. Facebook is, for many, a bag of hurt and its infiltration into attractive and otherwise standalone apps will be associatively painful for some.

Although Facebook’s impact in the Instagram community has yet to be seen, I cannot help but feel pessimistic about the app’s long-term prospects.

Instagram has provided, for me, a fantastic escape from Facebook. With this acquisition, Facebook is clawing at its distanced users, and hoping to increase its marketshare in doing so. Such strategy may work for some, but I doubt it will be successful for many.

More to come.