Facebook Snaps Up Instagram; Cue Hype And Backlash

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CEO Mark Zuckerberg marked Facebook’s acquisition of popular mobile photosharing app Instagram yesterday — at $1 billion, Facebook’s biggest ever — by posting this announcement:

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. 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.

Instagram’s meteoric success garnered 30 million iOS users in 18 months and earned accolades as the iPhone app of 2011. Its Android version, released last week, already has millions of downloads. The free photo-social-mobile app gives users 17 special-effects filters for their pictures – 5 million of which are uploaded daily.

Instagram CEO Kevin Systrom reassured his platform’s users, not all of whom are in love with Facebook:

It’s important to be clear that Instagram is not going away. We’ll be working with Facebook to evolve Instagram and build the network. We’ll continue to add new features to the product and find new ways to create a better mobile photos experience.

Instagram and Facebook already integrate nicely, and this deal promises that users won’t have to join Facebook or Instagram to use the other, at least for now. [more]

Eyebrows are raised as to why 30 million Instagram users, who pay nothing, are so valuable to the social networking giant that it would pay double Instagram’s $500 million valuation. The world of mobile-social photos is still manifest destiny, with no dominant player yet. Facebook’s move is strategically defensive and its most aggressive acquisition to date in terms of both price and reach.

“Facebook’s acquisition – no matter what Mark Zuckerberg tells you in a press release – is less about better integrating Instagram’s services into the world’s biggest social network (which it already does quite nicely) and more about becoming a publicly traded behemoth,” notes readwriteweb.com.

“Publicly traded companies need to grow to keep investors happy, and if they can’t do so by adding new users or boosting new revenue streams, they do it by gobbling up rivals.” Facebook’s Instagram takeover is a departure from its previous “acqui-hires,” buying companies for their programming and design talent rather than their product.

Mike Krieger and Kevin Systrom founded Instagram in 2010, as a followup to their stalled check-in service Burbn. “I remember what I’ll call ‘pivot day.’ We sat down and said ‘what are we going to work on next? How are we going to evolve this product into something millions of people will want to use?'” Systrom said last year. “What is the one thing that makes this product unique and interesting?” The answer they hit on was “photo sharing,” and the result was Instagram.

The backlash has already begun. Of Instagram loyalists, Om Malik writes, “It seems like these passionate people are quite upset over finding themselves under the yoke of Mark Zuckerberg… One of my favorite Instagramers, Elise Marie, shared a black screen in protest of the deal. There is a #instablack hash-tag that has been created to protest the deal. Clicking on #facebook on the service exposes one to even more photos expressing disappointment”

“When I posted a snapshot of my own previous story, many left comments that expressed a sense of loss and hurt. “Happy for the instagram crew. Bummed though, instagram was my fb alternative. Who trusts Facebook?” wrote @emersonnh.”

Facebook, in the process of going public as early as next month, ended 2011 with a cash reserve of almost $4 billion.

As noted by NBC’s Brian Williams, the Facebook bid is enough to buy Kodak 12 times over. Get the picture?

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