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Facebook to acquire Instagram

10 April 2012, 13:52

Social media giant Facebook has agreed to buy Instagram, the popular photo sharing site in a deal that will be worth about  1 billion dollars.  The deal was announced on Monday 9 April 2012. The make-up of the 1 billion will be cash and Facebook shares.  According to an update from Facebook, the deal should be concluded by 30 June 2012.

This is the largest acquisition made to date by Facebook.Instagram, which was only started in October 2010.  Instagram now has over 30 million users. Thus far Facebook has made mainly small acquisitions. In his announcement on the deal Mark Zuckerberg acknowledged it was the first time acquiring a company with so many users and indicated that not many deals of such a nature will take place in future.

According to Wikipedia, Instagram is a free photo sharing application that allows users to take a photo, apply a digital filter, then share it on a variety of social networking services  including Facebook, Twitter, Foursquare, Tumblr, Flickr , Foursquare and Posterous and Instagram’s own website.  The application is compatible with any iPhone, iPad or iPod Touch running iOS 3.1.2 or above. These social networking service include Facebook’s own competitors. What makes the photos on Instagram different is that they are in a distinctive square shape. whereas the more common aspect ratio used in mobile device cameras is 4:3.

Given Facebook’s aspirations in the mobile space, the acquiring Instagram could   turn out to be a key strategic move. There is a good chance that at some stage Facebook will bring your social graph into the picture.  Facebook has made great strides in connecting with their users across the internet and Instagram could be an important part of the puzzle in the mobile space.

Facebook insists that the site (Instagram) will continue to be run independently. Time will tell if this will indeed be the case. The trend in the past for Facebook acquisitions has been that the company bought is shut down and the talent is integrated into Facebook. Photo sharing played a big part in Facebook’s growth. especially the ability to tag friends in the photos. As at end of December 2011, Facebook had at least 850 million users.

This acquisition is likely to make some Instagram users uneasy given Facebook’s history with privacy issues and it’s usage of personal information. As Facebook prepares to list this year, it is under pressure to find more sustainable sources of revenue. There will be immense pressure in the company reach out to more users and provide information that can be of value to advertisers.  To what extent will it integrate it’s services with Instagram? Given that Instagram provides a service to Facebook’s own competitors how will it work? Facebook has given assurances that this ability to post on other networks will remain in place.

Do you use both Facebook and Instagram? How do you feel about this acquisition?  I would love to hear if you are excited or unhappy about it.

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