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Facebook Buys Less Than 24 Months Old Photo Sharing Company Instagram For $1 Billion

Facebook announced Monday that it had reached an agreement to acquire photo sharing company Instagram, describing it as a fun, popular photo-sharing app for mobile devices, for $1 billion in cash and shares. “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,” CEO Mark Zuckerberg wrote on his Facebook page. “We don’t plan on doing many more of these, if any at all.”

Instagram is a free photo sharing app that lets users click pictures from their mobile phones, apply an optional filter to the image and share it with their friends via Facebook, Twitter or Instagram’s own social network.  Instagram launched as an iPhone app in Apple’s App Store on October 6, 2010. By December 2010, Instagram had one million registered users. By July 2011, Instagram users had shared over 100 million photographs. It reached 10 million registered users in September that year. The number had hit 30 million by April 2012.

When Instagram released the much-awaited Android version of its app, it was downloaded over a million times in less than 12 hours. This speaks volumes about its popularity. Apple named Instagram as app of the year for 2011 saying the app makes it “near-impossible to take a bad shot.”

Instagram was founded less than two years ago by two Stanford graduates-  Kevin Systrom and Mike Krieger, who are in their 20s, and are now multi-millionaires. “It’s the Web fairy tale that all startups dream of,” said an analyst with Forrester Research, who added: “They took a simple behavior – sharing pictures with friends – and made it a utility that people want.”

Instagram has just 12 employees including its two partners. In early 2011, Zuckerberg of Facebook reached out to Instagram to discuss buying the company, but Systrom chose to keep it independent and focus on expanding it. At the time, Instagram had fewer than 7 million users. Now celebrities like Justin Bieber and brands like Gucci post regular updates.

Some users of Instagram are not happy with this acquisition. Soon after the news broke, many Instagram fans began voicing their displeasure on the service and on Twitter and Facebook. Others lamented the loss of what they saw as an alternative to Facebook and threatened to delete their accounts.

Facebook said it plans to keep Instagram running independently. That’s a departure from its tendency to buy small startups and integrate the technology – or shut them down altogether just so it can hire talented engineers and developers.

“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,” wrote Systrom in a company blog post. Instagram and Facebook executives declined to comment further on Monday.

Facebook’s billion dollar valuation of Instagram makes the less-than-two-year-old startup more valuable than 161-year-old The New York Times Company. The New York Times Company, publisher of media heavyweights like The New York Times, International Herald Tribune and The Boston Globe, amongst others, was valued at 946 million dollars based on yesterday’s closing price at the NYSE. This shows that modern technology companies are far ahead of conventional businesses.


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