Facebook CEO Mark Zuckerberg just announced his company’s latest acquisition on his timeline: a $1 billion buyout of Instagram.
The privately held startup operates a popular mobile app for photo sharing and styling. Until last week, Instagram only had an app for Apple’s (NASDAQ:AAPL) iOS, but it launched an App for Google’s (NASDAQ:GOOG) Android operating system that took off — registering a whopping 2,000 downloads per minute.
The deal is a nice fit for Facebook, which hopes to maintain its lead in the photo-sharing space. No doubt, Instagram will help user stickiness and engagement.
So far, it looks like Instagram will remain separate from Facebook. On his post, Zuckerberg says …
“That’s why we’re committed to building and growing Instagram independently. 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.”
In light of the big purchase price, it probably would be a waste to dump the brand. Keep in mind that Google has used this strategy with its own major deals, such as for YouTube.
Still, the deal isn’t a full-blown home run. Although Instagram has more than 27 million users, the company has yet to generate any meaningful revenue.
However, Facebook seems determined to find ways to monetize its mobile assets. Instagram will be a good place to experiment.
Tom Taulli runs the InvestorPlace blog IPO Playbook, a site dedicated to the hottest news and rumors about initial public offerings. He also is the author of “The Complete M&A Handbook”, “All About Short Selling” and “All About Commodities.” Follow him on Twitter at @ttaulli or reach him via email. As of this writing, he did not own a position in any of the aforementioned securities.