For no less than USD 1 billion, Facebook has acquired the company Instagram, developer of the popular photo application of the same name. The acquisition reinforces Facebook's position as the fastest-growing social network site.
Instagram is barely two years old, based in San Francisco and has just 13 employees. Like many start-ups in the technology sector, it does not have a solid business model, and it is unclear how the company makes any money. At the same it shows impressive growth figures, which helped Facebook's decision to pay such a huge price for the company. When Instagram recently launched the Android version of its app, it was downloaded over a million times in 24 hours. On the iOS platform, its user base numbers 30 million.
Of course Instagram is not the only photo app around. Among the many others are Lightbox, picplz, Tumblr, PicYou and Molome. Why Instagram has become so much more popular is not clear, although some say it's to do with the simplicity, user-friendliness and social aspects of the app.
In addition to taking and editing photos, Instagram supports sharing the photo across social networking sites such as Twitter, Facebook and Tumblr. Users can comment on each other's photos and give them a rating. This puts Instagram on track to become a popular social network in its own right, focused entirely on the mobile channel. And that's where further growth for Facebook lies.
Facebook has 425 million active mobile users worldwide, out of a total active user base of 825 million. Around 250 million photos are uploaded to Facebook daily. Facebook CEO Mark Zuckerberg said this is the company's biggest acquisition ever. With Instagram on board (although the company will remain independent), Facebook is looking to further boost its mobile user base. Facebook no longer sees itself as a social network site, but more as a ‘platform company’.
The acquisition also allows Facebook to show, ahead of its upcoming IPO, that it has the courage to spend large amounts of money on companies which may just be starting out, but can support further growth at the parent company. While Facebook is all about sharing photos online, Instagram is all about sharing photos over mobile phones. As an added bonus, the acquisition eliminates a potential competitor.
