Facebook to buy Instagram photo app for US$1 billion

US$100 billion Facebook Inc has agreed to fork out US$1 billion in cash and stock to acquire the photo-sharing application for smartphones. The deal is expected to be completed this quarter.

Is Instagram worth one-hundredth of Facebook?

Is Instagram worth one-hundredth of Facebook?

Facebook is probably looking at attracting the users of mobile devices through its acquisition of Instagram – its biggest acquisition yet.

“Instagram, owned by San Francisco-based Burbn Inc, was valued at $500 million after raising about $60 million last week from investors,” Bloomberg was told.The idea is to attract the advertisers interested in reaching the mobile users.

Instagram started out as the top free photo-sharing app on Apple’s App Store with more than 30 million users.

Only last week, the company introduced the app for Android devices as well.

Instagram has only 13 employees so the offer works out to some US$76 million per employee, according to the Los Angeles Times.

“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,” – Zuckerberg wrote on his Facebook fanpage.Instagram was launched in October 2010 by Kevin Systrom and Mike Krieger with a seed funding of about US$500,000.

It subsequently raised US$7 million in 2011, when it had 1.75 million users, according to Bloomberg.

California-based Facebook is the biggest social-networking service today and intends to raise US$5 billion in its initial public offering (IPO) – which is to date the biggest IPO for an Internet company, valuing it at US$100 billion.

Facebook’s CEO, Mark Zuckerberg, said it plans to let Instagram retain its independence, in an effort to reassure Instagram users and potential advertisers.

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