- Defensive acquisition. By acquiring Instagram, Facebook keeps this rapidly growing company out of the hands of its competitors, such as Google and Microsoft. In a short period of time, Instagram has accumulated over 30 million users, and their recent introduction of an Android application has been a huge success. Certainly Facebook doesn’t want this to be in the hands of its competitors. In addition, if Instagram were to remain independent and continue its remarkable growth trajectory, it could end up being a formidable competitor to Facebook in the future. From a defensive perspective, this acquisition makes perfect sense.
- Mobile photo-sharing platform synergy. Instagram’s mobile photo-sharing application has proven to be very popular and easy to use. By acquiring Instagram, Facebook will be able to leverage this technology and improve its own mobile experience, which by some reports has lagged lately.
- Engineering talent acquisition. Istagram has a small team of a dozen or so employees, but they have created a highly successful platform that is experiencing rapid growth. Facebook can leverage this engineering talent to improve its own mobile platform.
- Users and data. Facebook acquires access to 30 million users and the treasure chest of data contained in the uploaded and tagged photos. This type of data could be very valuable to advertisers.
Instagram completed a $50 million round of financing just last week. Venture capital investors in Instagram include Greylock Capital and Sequoia Capital.
The acquisition is expected to close later this quarter.
Link to Facebook's press release:
Links to articles on the acquisition: