Facebook to acquire Instagram for $1B

Facebook has agreed to acquire mobile photo sharing application Instagram and its team for about $1 billion in cash and Facebook stock, according to a press release.

The transaction, which is subject to customary closing conditions, is expected to close later this quarter. The acquisition is likely to drive Facebook’s valuation even higher when the company goes public, as it is expected to later this spring. Instagram was previously valued at $500 million when it raised $50 million in a series B round led by Sequoia Capital that closed just before the Facebook acquisition, according to TechCrunch.

The app will continue under the Instagram name and continue to support posting services beyond Facebook. Users can continue to have followers and follow people without connecting with them directly on Facebook

“Millions of people around the world love the Instagram app and the brand associated with it, and our goal is to help spread this app and brand to even more people,” Zuckerberg said in a Facebook post.

In the past, Facebook has bought companies for talent and either shut down their services or incorporated them into Facebook. Gowalla, for instance, closed its location-based service last month. Group messaging app Beluga became Facebook Messenger.

Zuckerberg noted that this is the social network’s highest profile acquisition, and said that the company does not expect to make others like this in the near future, perhaps to prevent speculation on whether Facebook would buy Pinterest.

“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,” Zuckerberg wrote. “We don’t plan on doing many more of these, if any at all. But providing the best photo sharing experience is one reason why so many people love Facebook and we knew it would be worth bringing these two companies together.”

In July 2011, we suspected that Facebook would release an Instagram competitor when leaked images of a Facebook mobile photo sharing app were discovered. The project never materialized. There were rumored reports of Facebook trying to buy Instagram several times over the past 18 months. Google apparently had talked to Instagram as well. It seems Facebook finally sealed the deal when it offered the mobile photo sharing company twice as much as it had been valued at previously.

We will update this post with more information as it becomes available.

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