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Facebook surprises with Instagram buy

April 9 2012 at 10:39pm

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Associated Press

The social networking firm is testing a feature that lets people create 'wishlists' of home furnishings, clothing and other items, as part of what could become a move into e-commerce.

San Francisco - Facebook will pay $1-billion in cash and stock for the photo-sharing application Instagram, making its largest-ever acquisition months before the top social media website is expected to go public.

The popular Instagram application, which allows users to add filters and effects to pictures taken on their smartphones, has gained about 30-million users since it first launched in January 2011.

Despite a loyal and active following, Instagram lacks any significant revenue sources. The start-up, with roughly a dozen employees based in San Francisco, reportedly closed a $50-million funding round last week from investors including Sequoia Capital that valued the company at $500-million, according to the technology blog AllThingsD.com.

Facebook, which is expected to launch a $5-billion initial public offering in May, will acquire Instagram's entire team.

“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,” Facebook CEO Mark Zuckerberg said in a blog post. “We don't plan on doing many more of these, if any at all.”

The deal, a closely kept secret at the tiny start-up, is expected to close this quarter. CEO Kevin Systrom announced the transaction to Instagram employees at a 9am meeting on Monday, according to a source inside the company. - Reuters


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