When Stanford University graduates Devin Systrom and Mike Krieger launched Instagram in October of 2010, they were just a couple of college graduates trying to hack their way into the highly competitive tech niche. Now, 18 months later, the popular app that enables mobile users to easily apply filters and post photos to social networks is being acquired by Facebook for the stunning sum of one billion dollars or approximately $33 per user! Since Instagram does not have a publicly disclosed revenue source and is not profitable at this time, the valuation is extraordinarily high.
Although Instagram has not monetized or developed revenue streams to date, their 30 million dedicated users uploaded over 400 million photos in 2011. The dedicated user base and incredible functionalities propelled it to the coveted status of the 2011 iPhone App of the Year.
Facebook CEO Mark Zuckerberg announced the acquisition on his Facebook page:
“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. We don’t plan on doing many more of these, if any at all. We think the fact that Instagram is connected to other services beyond Facebook is an important part of the experience.”
Zuckerberg also indicated that he plans to allow people to continue using their Instagram accounts to post photos to competing social networks and will allow users to choose whether or not the photos are posted to Facebook.
Michael Pachter, a Wedbush analyst and social media expert, is confident there will be more acquisitions in the near future:
“Facebook after this IPO is going to be in a position to be predatory. They can make sure no one steps in their way and buy anyone who gets in their way.”
The acquisition, which is the largest in Facebook history, is being funded by a combination of cash and stock and the world’s most popular social network is expected to hire 100% of Instagram’s employees – all 13 of them. The deal, which was announced yesterday, is expected to close later this quarter.