Facebook to pay $1bn for firm with 13 staff

 
Kasmira Jefford
Follow Kasmira
SOCIAL NETWORKING giant Facebook has snapped up Instagram, a two-year-old photo-sharing application that employs just 13 staff, for $1bn (£629m) in its largest acquisition to date.

The hugely popular application allows users to add filters and special effects to photos taken on their smartphones and share them through Instagram or other networking sites like Facebook, Twitter and Tumblr.

Since its launch in January last year, Instagram has attracted some 30m users. But despite a loyal following the start-up has yet to book any profit.

In a post on his profile page yesterday, Facebook chief executive Mark Zuckerberg said the deal marked “an important milestone” for the social networking giant “because it’s the first time we’ve ever acquired a product and company with so many users”.

He said the company planned to grow Instagram “independently” rather than integrating it into the social networking site as it has done with previous acquisitions.

Spending $1bn in cash and stock also marks a departure for Facebook, which has typically focused on smaller acquisitions worth less than $100m. Zuckerberg said Facebook did not plan on “doing many more of these [acquisitions], if any at all”.

The company, which is expected to launch a $5bn initial public offering in May, said it expects to complete the deal later this quarter.

Instagram was founded in October 2010 by Stanford University graduates Kevin Systrom and Mike Krieger with the aim of recreating snapshots taken on old Polaroid cameras.

Systrom has said he was first approached by Mark Zuckerberg to join Facebook in 2004 while he was still at Stanford, but he turned down the offer to finish his studies.

Systrom, who is said to own around 40 per cent of Instagram, is now likely to land a windfall of around $400m as a result of the deal. Krieger, who is said to hold about a 10 per cent stake, will net around $100m.

In a blog posted on Instagram’s website yesterday, Systrom said he and his team were “psyched” to be joining Facebook and reiterated plans to keep the application independent.

“With the support and cross-pollination of ideas and talent at a place like Facebook, we hope to create an even more exciting future for Instagram and Facebook alike,” he said.

The company, which counts Twitter co-founder Jack Dorsey among its investors, reportedly closed a $50m funding round last week from investors including Sequoia Capital that valued the company at $500m.