With its landmark initial public offering looming, Facebook Inc. on Monday, April 9, unveiled another deal -- a $1 billion agreement to acquire Instagram, a privately held developer of mobile photo-sharing software.
In an update on the social network he founded in 2004, Facebook CEO Mark Zuckerberg pledged to build Instagram as an independent offering, in part to avoid alienating the roughly 30 million users who "love the Instagram app and the brand associated with it."
"We need to be mindful about keeping and building on Instagram's strengths and features rather than just trying to integrate everything into Facebook," he wrote. He also pledged to keep offering the option to post pictures on other social networks.
The size of the deal was not lost on Zuckerberg, who described it as an "important milestone" and the first deal that would add such a large number of users.
"We don't plan on doing many more of these, if any at all," he wrote. "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."
The deal could solve one of the key problems the social network faces in its mobile aspirations, in that it would simplify and speed up the process for uploading pictures from mobile devices to Facebook pages. The Facebook application for the iPhone, for example, requires a user to go through numerous steps to take a picture. Instagram's app whittled the number of steps down to one, which led Apple Inc. to name it the "iPhone app of the year" for 2011.
According to Facebook's S-1 filing, an average of more than 250 million photos were uploaded to the social network each day at the end of last year. Another piece of Facebook's mobile weakness, as noted in its IPO documents, is its lack of advertising platform for its mobile offerings.
San Francisco-based Instagram was founded less than two years ago and has only 13 employees. Co-founder and CEO Kevin Systrom received seed funding from Baseline Ventures and Andreessen Horowitz for his project, dubbed Burbn, which evolved into Instagram. Instagram received a $7 million Series A round from Benchmark Capital and several individuals, including Twitter Inc. co-founder Jack Dorsey and Chris Sacca.
Benchmark's Matt Cohler sits on Instagram's board; he was an early employee at Facebook, holding the position of vice president of product management.
Reports surfaced last week that Instagram was about to close a $50 million Series B round.